Community Finance Brief: Impact Obstacles, Disclosure

This is the first part of a series that was looking to answer the question of why impact investors have not embraced the U.S. municipal bond market. Short-answer: it is complicated. But the root of it is in disclosure practices that are unique to the marketplace.

Someone smarter than me offered a funny anecdote recently: “If a group of people today were to come together and decide on the best way to finance U.S. state and local government projects the last thing they would end up with is the current U.S. muni market.” I agree with that but there is a reason it is the way it is.

This first part of the series looks at a bit of the history and offers some broad new ways to think about what information should be offered to the public if impact investors were to engage the market, but also in generally things that would benefit community finance in general.

Read the latest here.

Community Finance Brief: Basel and Banks

Since Basel III first implemented rules impacting bank ownership of municipal in regards to whether or not the asset class was considered “high-quality” and “liquid” one of the U.S. regulators overseeing the market had to create a liquidity facility to support the market and two banks that failed would be covered under so-called Basel Endgame. This looks to be slightly problematic for the municipal bond market as we review new proposed rules.

It also looks to have a particular acute impact on smaller, regional communities and those of lesser economic means. Read our take here.

Community Finance Brief: The Black Tax, Liquidity & Bond Banks

The concept of a tax levied on communities with a larger percentage of black people living in them has been discussed in various studies over the last four years. The latest by Breckinridge and ICE Sustainable Finance is the most comprehensive we’ve seen to-date. It finds that indeed the municipal bond market penalizes a bond issuer with a higher percentage of black people living in them. CSG discusses the study but also overlays the process with overall liquidity issues to consider and identifies bond banks as a potential solution for liquidity problems looking ahead.

You can read the latest Community Finance Brief here.

Community Finance Brief: Low-Income Communities & Natural Disasters

“The intersection of the lack of insurance options and low-income homeowners/renters’ proximity to areas prone to natural disasters lays out a humanitarian problem: low-income and minority communities are more vulnerable to the risks of natural disasters and they also struggle the most to recover. Recent changes in the property insurance industry exacerbate this problem. The process of recovery and rebuilding is made more challenging as the way in which risk is transferred across parties leaves low-income communities with less options, making it more difficult to return to normal after a disasters and even less likely to have an opportunity to grow their position economically over the longer-term.” 

Read this week’s Community Finance Brief.

Community Finance Brief: Less Affordable Insurance Likely to Burden State, Local Budgets

Changes in the property insurance industry have yet to make an impact on the municipal bond market as far as credit views of major rating agencies or interest rates but there are plenty of signs that the market will adjust. We review a few areas of interest to consider.

“Just as the U.S. economy was overexposed to mortgage risk in 2008, the economy today is over exposed to climate risk,”  Eric Andersen, president of Aon, PLC in U.S. House of Representatives testimony. 

Read the latest Community Finance Brief here.

Community Finance Brief: Public Transportation post-COVID

 The way in which people move around urban and suburban communities in the United States has changed dramatically in the last four years and has had a generally negative impact on mass transit systems around the country.  Both Moody’s and Standard & Poor’s have the public transport sector on ‘negative outlook’ citing concerns regarding low ridership and the phasing out of COVID-19 relief. In this edition, we look at public transportation and what New York state has done to support the future of New York City’s massive public transportation network. You can read it here.

Poor data renders muni ESG rudderless

CSG and James McIntyre co-authored an opinion piece in The Bond Buyer on September 20th that encompasses our view that ESG is much more than a label. There is a lot of work that still needs to be done when it comes to understanding non-financial, corollary risk and return associated with projects funded by municipal securities but at the end of the day, it comes down to public trust in government. If you have a Bond Buyer password you can read the, opinion here. If you don’t have a subscription, you can read it here.

Community Finance Brief: Govt. Shutdown & FEMA

In this edition, we review a potential government shutdown in the midst of hurricane season that would see an already challenged FEMA with marginal funding during a time when property and casualty insurance companies are changing their business models. Read brief here.

Governments eyeing flow of opioid settlement funds

Local governments and major drug manufacturers continue to finalize settlement agreements regarding opioid abuse. With billions of dollars on the table, some governments are reviewing the securitization options. CSG works with local governments looking to maximize settlements through evidence-based approaches. You can read an article about the topic here: published August 3rd, 2023.