The degree of success of muni bonds that lift communities often stems from showing issuers how they’ll be graded.
There’s no substitute for studying hard. But when the subject is expansive, it also helps to know what you’ll be graded on. Issuers of municipal bonds intended to help their communities are often at this crossroad: raising their hands to lend support but less certain on which approach to take, given the many possibilities.
Engagement Helps Set a Course for Impact
Proceeds from such muni bonds are typically used for specific purposes, helping move the needle on community-based social and environmental initiatives. The bonds should have clearly stated goals, like replacing lead water pipes, broadening mental healthcare access or funding school breakfast programs.
Determining the muni bond’s focus is only half the work, however, since investors also expect results. And not all such bonds work as advertised. The more transparent issuers fill out their report cards, using key performance indicators (KPIs) to help track progress and measure actual impact.
The need for support across communities continues to grow, expanding the potential scope of muni bonds that can help. More prospective issuers are on board, too, and are often open to suggestions on how to get started. This is where active investor engagement* adds a lot of value—examining options, determining purpose, setting expectations. With a clearer understanding of these, issuers can derive not just where to focus but likely how well they’ll meet investors’ ESG expectations.
Schools Are an Open Book of Impact Potential
Local school districts are a good example of engagement’s important contribution to the bond issuance and investment process. Most districts are struggling with helping students make meaningful progress, and with fewer teachers and shrinking revenues.
In practically every major city, district children seek mentors, classrooms lack supplies, and facilities need repairs, but resources are beyond stretched. For instance, the average age of school buildings is 70 years, with some surpassing 100.
This leaves the door open to a lot of impact bond projects that can make a difference, whether by providing new computers, stronger math and science curriculum, ensuring safer drinking water and stronger support networks for educators. In fact, data shows that improving school facilities and their general surroundings leads directly to significantly better long-term outcomes for students.
As school districts weigh their options, we help them consider key ESG projects or goals and define KPIs that would enable them to gauge progress for each (Display). Many districts share common problems, so some metrics are universal, but we also propose KPIs that target specific local challenges.
