Private Prison Divestment Efforts Continue at Natural Investments

In May 2018, when President Trump’s “zero tolerance” immigration policy took effect, prison divestment and advocacy efforts received an explosion of public interest. Since then, the headlines have faded, but our Heart Rating continues to hold fund managers accountable.

Natural Investments’ Heart Rating, which has been a fixture of our firm since 1992, is an analysis tool that examines mutual funds and exchange-traded-funds (ETFs) advertised as environmentally and/or socially conscious in investment selection and ongoing decision-making processes.

The Heart Rating assigns between one and five hearts in three categories:

  • Environmental, social, governance (ESG) screening policies
  • Shareholder advocacy activities
  • Community investing

While this tool is an excellent resource for individual investors building a portfolio, it also opens a dialogue and opportunities for Natural Investments’ advocacy process. The rating pushes fund managers to better align their holdings with their stated values and creates environmental and social change through investing.

A recent Heart Rating success story comes from our research team’s engagement with Avantis Investors, which launched three ETFs in 2022 designed to “allow investors to make sustainable investments.”

In considering the funds for inclusion, our team used the Heart Rating tool to compare holdings with managers’ claims that for-profit prison companies were excluded. While it turned out that one fund in question did not contain companies like CoreCivic and the GEO Group (the two largest private prison owners), it did include companies frequently contracted for private prison operations, including Sodexo (food service) and Mitie Group PLC (facility management).

When our team alerted the fund managers about these holdings, they immediately dropped them from inclusion in the fund. It was a win for investors who don’t want to support the for-profit carceral system, especially now that national interest in private prison divestment has waned.

Divestment and advocacy efforts that received an explosion of public interest in May 2018, when President Trump’s “zero tolerance” immigration policy took effect, have since faded. Back then, USA Today reported that private prisons were cashing in on U.S. Immigration and Customs Enforcement (ICE) detainees that separated more than 3,000 children from their families.

As a result, campaigns targeting government and higher education pension funds to advocate for the divestment from private prison companies gained momentum in 2019 and 2020. In 2020, Natural Investments published “Progress on Private Prison Divestment,” which detailed some of the divestment efforts in progress at that time. But by many measures the situation on the ground has gotten worse.

“ As of August 2023, nine out of 10 people in ICE detention were in private prison facilities.”
ACLU report

Even though Trump stopped the separations via executive order in June 2018, he did not officially rescind the policy; the Department of Justice eventually rescinded it in 2021, according to NPR.

And even though a change in the federal administration brought a different attitude toward private prisons at the highest level of government, the outcomes are not great. A week after taking office in January 2021, President Biden issued an executive order to end Department of Justice contracts with “privately operated criminal detention facilities,” but, it notably does not include ICE, which is part of the Department of Homeland Security.

ICE’s exclusion from the 2021 executive order is significant. According to a 2023 ACLU report:

  • As of August, nine out of 10 people in ICE detention were in private prison facilities. Discouragingly, the number of ICE detainees has increased almost 100% since 2021, and private prison revenue has increased over the past two years (see graph).
  • In January 2021, ICE held an average of 15,444 people per day; now the daily average is 30,003. While post-pandemic conditions and the ability of immigrants
  • to cross the border (many were turned away under the Trump administration) account for some of this surge, the practical outcome of continued revenue for private prison companies remains.
  • In 2022, the GEO Group made $1.05 billion in revenue from ICE contracts alone.
  • CoreCivic similarly made $552.2 million in revenue from ICE detention contracts in 2022.

Although private prison divestment efforts have receded from the public eye over the past two years, there
is clearly an ongoing need for action. Individual, institutional, and government investors can put their dollars to work to impact this situation. Below are some suggestions for individual investors to implement in their portfolios and beyond.

  1. Use the corporate accountability nonprofit organization As You Sow’s Prison Free Funds site. This database details prison-related companies a fund may hold and the fund’s total exposure to this industry. Investors wishing to make changes in their portfolio or to avoid private prisons altogether can make informed decisions using this robust tool.
  2. Support organizations that continue to advocate for policy change. The National Network for Immigrant and Refugee Rights, Freedom to Thrive, the Queer Detainee Empowerment Project, and the Human Rights Defense Center are active in this arena.
  3. Engage your representatives at the municipal, state, and federal levels. Changes in city and county budgets and practices are needed as much as larger federal policy measures.
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