In Eric Glass’s experience, no one actively seeks out a career in municipal markets. In fact, when Glass, senior vice president and senior portfolio manager at AllianceBernstein (AB), asked students in an MBA class if any of them was interested in or had any experience with corporate or municipal debt, the answer was none. Predictably, everyone was interested in more exciting sectors like private equity, hedge funds or social entrepreneurship. But with the public bond market now offering investors a fixed income strategy that can deliver both low risk, predictable returns, and social and environmental impact, it’s time for munis to move into the spotlight. And advisors and money managers looking to appeal to the growing numbers of wealthy investors interested in sustainable investing can offer impact munis as part of a diversified ESG strategy.

When I talked to Glass about the evolution of AB’s municipal impact investing strategy, he told me he’s been interested in fusing financial expertise with public policy to reduce economic disparities for years, but it wasn’t until 2015 that the bottom up market was ready. “By 2015, we finally reached the tipping point for sustainability,” said Glass. “Climate scientists were warning that we were approaching the point of no return, wealth and health statistics were showing growing income inequality, and investors in the U.S. and Europe were calling for impact strategies. At AB, we were getting requests from key private channel clients.”   

In February 2017, Glass and his team launched the AB Municipal Impact Portfolio, currently with over $500M in assets. Municipal Impact invests in issues that deliver a positive social and environmental impact, with a focus on underserved and low socioeconomic status communities, including education, health care, low carbon/renewable energy, mass transit, water/wastewater management and economic/community development. Each investment has a specific intention, and the issuer is reviewed and scored based on environmental, social and governance criteria for portfolio inclusion. Performance is tracked through sector specific metrics and key performance indicators.

Glass brings a unique array of expertise to managing Municipal Impact, including research, trading and portfolio management, as well as grass roots experience running a homeless shelter in New Jersey. “The public sector is the original impact market,” explained Glass. “We’re dealing with public goods and the most efficient allocation of those goods, and that’s what local municipalities and states are responsible for. The important question to ask is, ‘Where is a municipality going to focus their energy and how are they going to build and support a viable economy that has the ability to grow over time and spread its benefits to all of its citizens?’”

“Water, transportation, education, utilities, housing—these are some of the public market issues that have a quantifiable impact on everyone in a community,” said Glass. For example, everyone in the New York City area is affected in some way by the MTA. Everyone who flushes a toilet in Boston is affected by policies at the Massachusetts Water Resource Authority.

Glass likes to use a case study from Boston Medical Center to illustrate how Municipal Impact targets specific intentions. Boston Medical is a private not-for-profit institution and the largest and busiest provider of trauma and emergency services in the New England region. It’s also the safety-net hospital for the city, with over 40 percent of the gross payer mix coming from Medicaid. “By investing in Boston Medical, we were looking to reduce the huge disparity in life expectancy between the Roxbury and Beacon Hill neighborhoods,” said Glass. “These two communities are only two miles apart but there’s a 30-year difference in lifespan.”

Glass explains that Boston Medical is a beacon of light in working to change the trajectory of health care and keep patients healthy by addressing issues before they reach the hospital, especially the emergency room. So not only does Boston Medical deliver quality medical care within their buildings, but they also have strong outreach into the surrounding community to address the social determinants of health: housing, workforce development, education, transportation, childcare and nutrition. Glass stresses that these are the factors that raise people’s quality of life, which correlates strongly to life expectancy.

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