Government bonds have long been synonymous with public spirit. During World War I, Hollywood celebrities like Charlie Chaplin and Ethel Barrymore promoted “Liberty Bonds” to raise funds for U.S. military efforts. In the decades after the war, an irrepressible Wall Street salesman named Jim Lebenthal coined the phrase “Built By Bonds” to popularize buying local-government debt for public works projects.

A new generation of investors is imbuing that traditional sense of purpose with an awareness of those underserved in American communities and markets. The “fiscal justice” investing strategies they’re developing subvert the existing municipal bond market and use it to alleviate some of the inequities in American society.


Fiscal justice strategies are still new and haven’t yet been packaged into a product that retail—or even institutional—investors can put money into. But the idea is gaining currency among all players, including foundations, academics, and impact investors, and may represent the next wave of socially responsible money management.

“A municipal bond is an IOU from a city government,” said Chelsea McDaniel, a senior fellow with a research firm called Activest, in an interview with Worth. “They were created to be impact bonds long before we thought of them that way. The proceeds should go to equitable outcomes for schools, roads, transportation, public safety, which may not include policing, and economic development that supports small businesses and good jobs.”

Several municipal market veterans founded Activest in the wake of the violence in Ferguson, Missouri, after police killed Michael Brown. The group spent several years trying to determine whether there was a connection between the experiences of Black residents and the fiscal practices of the municipalities where they live.


Over time, that work expanded to look at how communities access the capital markets and, in McDaniel’s words, “whether that capital goes to things that benefit Black residents or lead to further disparities.”

When Activest began its work, McDaniel said, cities like Ferguson, which got its revenue from fines and fees levied on its residents, were seen as outliers. Activest documented examples of “taxation by citation” around the country, proving that cities achieved more substantial fiscal outcomes when they prioritized the well-being of their most marginalized residents. Wharton School researchers later replicated those findings.

Meanwhile, other research documented the existence of structural inequities in the municipal bond market. Put simply, communities with higher concentrations of Black residents pay higher borrowing costs, all else equal. The phenomenon, often referred to as the “Black Tax,” troubles many municipal-market participants, who see it not only as living proof of structural racism but an insidious Catch-22 that penalizes the very communities that need capital the most.

San Francisco-based Adasina Social Capital may have been the ideal investor to put Activest’s research to work. The company calls itself a “bridge between social justice movements and financial markets.”

“We believe that spreading wealth more equitably among the population will make a more stable country and economy, and that is better for all of us,” said Maya Philipson, Adasina’s co-founder. “People are very impacted by the financial health of their municipalities, and that is a great way to start looking at the systemic racism that goes into the racial wealth divide.”

Adasina collaborated with Activest for a fiscal justice municipal market pilot project in 2022. With funds from the Robert Wood Johnson Foundation and other philanthropies, Adasina bought $50 million of muni bonds from various issuers—local-government entities like cities and school districts—with predominantly Black populations.

The project had mixed results. In part, it was intended to test out the process, to get investors like Adasina familiar with the quirky, opaque municipal bond market. In that sense, it succeeded. But it was less successful in making a dent in the black tax because of the small amount of money deployed versus the enormous scope of the problem.

And the project never answered a critical question that the participants had wrestled with for months: to what extent can passive investors hope to have an impact? Was it enough to buy bonds, in other words, or would they have to become muni-bond vigilantes?

“Are there bondholders that could be engaged with this information?” McDaniel wondered. “Can we encourage them to demand more accountability and transparency with issuers?” Eric Glass, who in 2022 left a long-held job running AllianceBernstein’s municipal impact fund, thinks the answer is an emphatic yes.

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“It’s one thing to make an investment, but it’s another thing to use the leverage you have as an investor to expedite the change that the community wants,” he said in an interview. Glass’ goal, he says, is to partner with underserved communities “to expedite and to speed up the change so that we reverse decades, if not centuries, of disinvestment.”

Glass is now working on developing his fiscal justice investment strategy. He says, “incredible demand from endowments, foundations, public pensions, and others around investing in a way that aligns with their mission.”

That doesn’t even include retail investors, who may be just as hungry for such an offering. When The New York Times ran an article about one of Activest’s founders with a mention of the fiscal justice project, Adasina was swamped with inquiries.

Vance Barse, a registered investment advisor based in San Diego, has a roster of clients who’d sign up in a heartbeat—and at least one who’s tried to develop a similar strategy on her own. The woman, now in her eighties, is a “rags to riches” story, Barse said and has invested extensively in finely targeted areas near where she grew up.

A strategy developed by fiscal justice practitioners “would allow people to manifest their well intentioned investment decisions. You’re able to deploy capital to serve a purpose but also get some level of return,” Barse said. “The conversations that I have with (clients) are really about the impact, how do we change the situation? This is a way to achieve multiple objectives simultaneously for the well-intentioned investor.”

Activest hopes to be able to offer an investment product that would allow people like Barse’s client to funnel money to underserved communities while, ideally, also addressing some of the structural issues in the market. “We do not have the municipal market we dream of,” McDaniel said.