Last year’s municipal Deal of the Year was a social bond issuance from Chicago. “Your opportunity to fight climate change, create affordable housing and strengthen our neighborhoods,” is what the city’s website tells the public. This transaction also lowered the threshold for a minimum investment (minibonds!) and made a locally focused marketing effort. The details of these aspects and the programs more broadly to make them functional and marketable to the public were very well done. From a cost of capital standpoint, who really knows if the effort was worth it but as a cheerleader for the Public in public finance, there is much to learn from this transaction.

We are now a little over a year from the closing of the bonds and now we learn if the rubber will meet the road as far as long term intent. The biggest lift for a social bond, a green bond, a sustainable bond, is not really in how your market yourself initially - it is how you continue to update the public as to your efforts. Efficacy entails monitoring and evaluation and one cannot do that without the bond issuer keeping the public up to date on its efforts.

In Chicago, it is unclear whether or not this will happen. The issuer has until September of this year to update disclosure, if it intends too. This dilemma is a real-life example of a larger debate in public finance as to how states and localities update the public on their social and environmental efficacy efforts. The lack of continuing disclosure if it happens in Chicago will be a larger tell about the real status of climate change, equity and municipal bonds.

Read more about this litmus test in this week’s Community Finance Brief.