Two of the nation’s largest Black investments banks—Siebert Williams Shank & Co. (SWS) and Loop Capital Markets—are teaming with five of Wall Street’s largest state and local government bonds buyers to ask potential clients questions about racial equity.
Municipal underwriters SWS and Loop Capital are working with BlackRock Inc., Goldman Sachs Asset Management, Lord, Abbott & Co., Morgan Stanley Investment Management, and Vanguard Group Inc. on the nationally groundbreaking partnership in their business.
Siebert Williams Shank was the senior manager of the $328.5 million issuances for the Dormitory Authority of the State of New York for its university system serving 220,000 students.
SWS president and CEO Suzanne Shank told BLACK ENTERPRISE by email that investors have long been focused on ESG policies and disclosure in the corporate sector. Now they are turning their attention to the $3.8 trillion municipal bond market. The questions aim to provide investors with critical information about government entities’ efforts to promote equality.
“As the No. 1 MWBE municipal finance firm for over two decades, it was imperative for Siebert to join this partnership that’s engaged in such an important social initiative,” Shank says.
Warren “Bo” Daniels Jr, head of Public Finance Division, Loop Capital, stated in a news release: “Loop Capital is pleased to be part of such an important and meaningful project. We believe a framework that provides interaction between issuers and investors is a positive development in achieving greater transparency.”
Over time, Shanks says it is expected that information related to these topics will play a larger role in buyers’ investment decisions.
The questionnaire, known as the Municipal Issuer Racial Equity & Inclusion Engagement Framework, seeks answers on how cities focus on racial inequality across America. It is now complete and can be found on the website of JUST Capital, a nonprofit that collaborated on the survey.
The new effort comes as more focus is placed on racial equality and socially conscious issues after the killing of George Floyd and subsequent national Black Lives Matter protests. Investors are placing more emphasis on social awareness with an increase in ESG Bond issuance, precisely Social Bonds.
Shank says the fact that some of the most prominent municipal bond investors are requesting transparency with respect to racial and social policies by municipal issuers demonstrates the significance of these issues for the investor community. Both existing and potential clients will be asked to complete the questionnaire before bond deals are set up.
“Voluntary responses to the framework provide an opportunity for government entities to increase communication with buyers of their bonds and strengthen those relationships,” .she says
SWS and Loop Capital have committed to present the framework to municipal issues when they access the markets. Shank explained as issuer’s bonds are regularly traded in the secondary market, this information may aid buyers in making investment decisions driven by activity geared toward inclusion.
Further, boosting revenues or profits were not the main motives that led to the new initiative.
“We did not partner with the alliance to gain more business,” Shank says. Rather, we wanted to ensure our clients were fully aware that investors are seeking greater transparency with respect to social and equity issues and could determine at some point to make investing decisions based on a municipality’s policies.”