A matter of time: Will prisons be the next big ESG debate?

Sex and the City actress Cynthia Nixon, who is running to be New York’s next governor, slammed JP Morgan Chase, BlackRock and Wells Fargo for “propping up” private prison firms CoreCivic and Geo Group at a May Day protest in Manhattan this month.
The private prisons have come under fire over allegations of human rights abuses and lobbying for laws that benefit their business, like the detention of undocumented immigrants.
Nixon said: “This whole industry that is exploding right now is propped up by debt from these major banks and these major banks should not be investing in this human suffering.”
She is the latest high-profile New Yorker to attack those with financial ties to the controversial US private prison industry.

New York City’s pension system divested $48m from private prison companies CoreCivic, Geo Group and G4S last June, citing concerns about human rights abuses and health and safety violations.

It’s an issue that has also generated a firm response from some investors, concerned, they say, about reputational and financial risks to their portfolios over the increasingly contentious topic.
New York City’s pension system divested $48m from private prison companies CoreCivic, Geo Group and G4S last June, citing concerns about human rights abuses and health and safety violations.
At the time, trustee, Bronx Borough President Ruben Diaz Jr., encouraged other investors to follow suit, saying: “In the interest of justice, other municipalities and pension funds should consider our example on the issue and move to divest from the for-profit prison industry.”
New York City’s decision came after activism by the New York State United Teachers, who in 2015 adopted a resolution to divest their pensions from private prisons.
Teachers have been at the forefront of battles to divest from private prisons, says NGO Enlace, which has been coordinating student, union and citizen prison divestment campaigns across the US.
Jamie Trinkle, Campaign and Research Coordinator at Enlace, says: “The prison divestment campaign is very much tied to teacher movements. They are tired of disinvestment in students and don’t want to invest in their potential future incarceration.”
In February, a group of California Teachers Association (CTA) representatives petitioned CTA to direct CalPERS and CalSTRS to divest from Geo Group and CoreCivic. The union’s board of directors rejected the idea and instead backed the fund’s strategy of engagement.
In other parts of the US, state senators are picking up on teacher campaigns and tabling bills to divest public pension plans from private prisons, says Trinkle. Democratic New York State Senator Brian A. Benjamin has tabled a bill to prohibit the investment of common retirement funds in private prisons. New York’s state pension fund is reported to have an $11.5m interest in the industry.
In Oregon, Democratic Senator Kathleen Taylor has tabled a bill to divest the Oregon State Public Employee Retirement system from private prisons and companies with over a million shares in Geo Group and CoreCivic.
The so-called Million Shares Club includes Bank of America, BlackRock, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Northern Trust, Prudential Financial, State Street and Vanguard.

The New York City Pension Funds decision to divest last year was a big victory for the prison divestment campaign. It was the first US public pension plan to take the step, and was quickly followed by the Philadelphia Board of Pensions and Retirement, which sold $1.2m in stock in Geo Group, CoreCivic and G4S.
New York City Comptroller Scott M. Stringer told RI: “Our criminal justice system has failed a generation of Americans because, for decades, we built bigger prisons instead of greater schools, and were ‘tough on crime’ instead of ‘smart on crime’. And as President Trump ratchets up hateful rhetoric and steps up deportations, private prison companies are going to see enormous reputational harm – and that means they’ll become even riskier investments. The industry wants to turn back the clock on years of progress on criminal justice, and we refused to sit idly by and watch that happen. Divesting was the right thing to do – financially and morally.”
Prior to divesting, the Comptroller’s office and consultants analysed the financial risk and found it was minimal and would not violate fiduciary duty. Their analysis also found inherent investment risks in for-profit prison companies, with reports of a pattern physical and sexual abuse of inmates, wrongful deaths and increased violence due to improper staffing. They concluded: “These failings can lead to reputational, legal and regulatory risks – which could seriously harm investors. Because these risks are implicit in the industry, the Comptroller’s Office is unable to engage with private prison companies and encourage policies that would reduce them.”
Geo Group and CoreCivic, which have market caps of $2.9bn and $2.5bn respectively, have criticised the Comptroller’s move.
In a statement to Responsible Investor, Pablo E. Paez, Executive Vice President of Corporate Relations at Geo Group, said: “We strongly reject the New York City Comptroller’s misguided decision, which was based on political rhetoric rather than facts. First, our company does not and has never taken a position on, or advocated for or against, criminal sentencing or immigration policies. Second, our GEO Continuum of Care programme was recently awarded the American Correctional Association’s Innovation in Corrections Award for demonstrating an improved rate of returning prior offenders to their communities with the skills and resources to keep them out of prison. Third, we act as a contractor to the Government, fulfilling their directives and meeting their objectives with government oversight and onsite monitors at each facility. Finally, our 23,000 employees worldwide are proud of providing high quality services to the men and women in our care with respect and dignity. We welcome the opportunity to have a fact-based discussion to dispel the myths about the services we provide and discuss how we have been part of reducing recidivism and helping those entrusted to our care re-enter society.”
Amanda Gilchrist, Manager, Public Affairs At CoreCivic, told RI: “We simply will not tolerate the lack of honesty in the public dialogue about our company or, even worse, the incredibly serious challenges facing our country that our company is working with our partners to solve.”
Gilchrist said that CoreCivic does not lobby for proposals around detention or incarceration and said: “If the government reduced its use of services like ours, it would create a humanitarian crisis because the government doesn’t have the facilities or workforce to address this challenge. Additionally, using contractors to operate immigration detention facilities ensures that when elected leaders change policies, taxpayers aren’t left holding the bag.”
G4S declined to respond.