Agents of Impact | April 21, 2023

Lourdes Germán, Public Finance Initiative: Tilting the $4 trillion muni market toward racial equity

Dennis Price

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ImpactAlpha Editor

Dennis Price

ImpactAlpha, Apr. 21 – Attorney and academic Lourdes Germán recognized early the power of public finance. She has spent years working at firms including Fidelity Investments and Breckinridge Capital Advisors in public finance. Most recently, she launched Public Finance Initiative to help market stakeholders prioritize values that include racial equity and environmental justice while steering capital toward schools, water systems and other determinants of health and well-being.

Germán’s nonprofit is leading a wide-ranging effort to nudge the $4 trillion municipal bond markets to address systemic inequities. Public Finance Initiative is out with a framework for municipal bond issuers that lifts up the best practices for embedding racial equity.

Denver’s Elevate and RISE bonds, for example, funded projects in neighborhoods across the city as part of a long-term plan to build a more inclusive and equitable economy. The strategy,  says Germán, “speaks to what investors are telling us – that they want a stronger commitment that’s visible.” 

Germán’s efforts to create a pipeline of issuers with strong racial-equity practices is helping shift the narrative of bond markets as a catalyst for change.

The new framework follows convenings with more than 100 issuers from 34 states, as well as investors and investment banks, underwriters, bond counsels and rating agencies.

Backed by the Robert Wood Johnson Foundation, the collaboration includes the National League of Cities, the Urban Institute and the Initiative for Responsible Investment, among others (RWJF also sponsors ImpactAlpha’s Muni Impact coverage).

The stakeholders are thinking beyond muni markets to other sources of public finance, including federal funding that has an equity mandate. Capital stacks for infrastructure assets are diverse. Roads, bridges, affordable housing, “they’re not just going to be funded by one thing,” says Germán. “If you can integrate equity across the way you think about the asset, and the way you think about its funding, holistically, that’s an even stronger intervention.”

Public Finance Initiative is testing the guidance with a cohort of issuers. Says Germán, “They’re all thinking intentionally that there’s a deeper and different way to integrate racial equity.”