Municipal Impact funds only the bonds issued for Boston Medical’s bricks and mortar infrastructure. But having financial security around its medical delivery system enables Boston Medical to sponsor programs that support the overall health of that community, like Reach Out and Read, Street Cred, the Medical-Legal Partnership and the Food Pantry Rooftop Farm. As Glass explains, Municipal Impact is supporting Boston Medical’s transition from a fee-for-service business model to a population health business model, positively impacting their balance sheet.
“When we look to invest for impact, being able to engage with issuers directly is key,” said Glass. “If we can’t partner with an issuer we don’t make the investment.” For utilities, for example, the inquiry is based on the effects of climate change and how municipalities, especially on the coasts, are using their capital plans to make their communities more resilient and able to adapt. Risk assessment is an important part of AB’s overall methodology, for both fixed income and equity. Glass believes this helps AB evaluate the impact of climate change on asset value. He is also expecting the ratings agencies to step up their reporting on climate risk and address the clear business and investment imperative that these environmental risks are real and material. Moody’s, for example, just bought a European firm focused on the impact of environmental issues on investments.
Since inception (2/1/2017), the AB Municipal Impact Portfolio is generating a 4 percent tax-exempt yield, with 80.9 percent of holdings rated AAA to A by S&P, Moody’s and Fitch. The portfolio now has more than $500M of AUM, and Glass’s vision that munis could be an engine for reducing income disparities while creating safe, predictable returns at competitive rates is now being realized.
Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.