Behind the Bars: Invest in Racial Justice with OpenInvest’s Prison Industrial Complex Cause
The Black Lives Matter protests of 2020 were arguably the most significant social justice movement to reach widespread scale in America since the civil rights movement. As the year ends and the prospect of a safe vaccine suggests a return to normality in 2021, the call for racial justice will likely endure as a key part of the new year’s priorities. In line with this momentum, more and more investors are taking a hard look at the Prison Industrial Complex (PIC).
The Prison Industrial Complex is a web of bureaucratic, political, and economic interests that encourages increased spending on imprisonment, regardless of the actual need. As aspects of incarceration management are privatized, profit-seeking corporations develop warped incentives to maximize their profits - sometimes by influencing the criminal justice system itself. CoreCivic and CEO Group, for example, two of the largest private prison corporations, spent at least $5.1 million in 2016 on lobbying and campaign contracts to promote legislation that results in higher rates of incarceration and immigrant detention.
Private prisons are just the tip of the iceberg, however: when it comes to inmates, there is a huge business in specialized food management, niche electronic surveillance and telecommunications opportunities, and even in using prisoners as low-cost labor (of approximately 90 cents per hour) for everything from agricultural produce to latex balloons.
The size and breadth of the PIC can be shocking. With 2.3 million people in confinement and nearly three percent of the population under some form of correctional supervision, the United States imprisons far more of its people than any other country. At the turn of the century, California alone held more inmates than France, Great Britain, Germany, Japan, Singapore, and the Netherlands combined; in 2017, the number of prisoners its system was built to house has ‘stabilized’ around 137.5% of design capacity. At a national level, this comes at a cost of $182 billion per year, without accounting for the costs borne by prisoners themselves. It is estimated that calls from prisoner pay phones alone generate over a billion dollars in revenues each year, for example. And while the number of prisoners in the US has skyrocketed over the past few decades, much of this growth has come from non-violent offenders.
Part of the added cruelty of this system is its disproportionate impact among different kinds of Americans. Black men are five times as likely to be arrested for a drug offense, despite comparable levels of illegal drug use with white men. As a result, about 40% of the inmates in the US are African-American, despite representing only 13% of U.S residents. Immigrants are also particularly targeted; ICE, the US Immigration and Customs Agency, disproportionately relies on private contractors to hold non-citizen detainees relative to citizens.
So what can investors do? For starters, responsible investors are beginning to become conscious of where they hold securities that prop up the PIC and screening out these companies. Groups like WorthRises and American Friends Service Committee have developed extensive coverage of the worst offenders in the PIC space, while initiatives like Obama’s 2016 Fair Chance Business Pledge created a framework to highlight progressive hiring practices among American institutions and companies with respect to reintegrating former convicts. OpenInvest’s PIC Cause, launched in 2019 and updated this year, integrates these data points and more in a proprietary methodology that divests from companies that profit from imprisonment and prison labor while investing in companies committed to hiring the formerly incarcerated.
For those invested in a vision of a more equitable America, dismantling the Prison Industrial Complex is part and parcel of the movement for racial, social, and economic justice. Progress has been slow and uneven, but forward. Last year, for example, activists and investors managed to convince eight banks — including JP Morgan Chase, Wells Fargo, and Bank of America, among others — to refuse further financing of private prison companies like GEO Group and CoreCivic, representing a loss of $2.35 billion in credit lines and term loans. What’s more, at least 22 states currently have contract bans with private prison operators.
Structural change, by definition, takes place in every arena. With OpenInvest’s Prison Industrial Complex Cause, investors can take definitive action in aligning their financial goals with their principles.
Number of companies profiting from prison industrial complex by state: