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How this company helps investors divest from the prison industrial complex

OpenInvest Co-Founder Josh Levin joined Yahoo Finance Live to discuss how OpenInvest is helping investors divest from companies supporting prison labor.

Video Transcript

SEANA SMITH: All right, we want to get to a new report out today, going after for-profit prisons. OpenInvest, it's a company that helps investors really better align their portfolios along with their values. They updated their ESG cause to expose companies supporting prison labor and also immigrant detention facilities, as well as they also highlighted those committed to hiring former prisoners.

But for more on this, we want to bring in Josh Levin. He's the co-founder of OpenInvest. And he's here with a little bit more details on this report. And Josh, looking at this report, you highlighted over 220 companies. Or it includes 220 companies. Let's start with those companies that, I guess, profit from mass incarceration and profit from prison labor. What are some of the industry trends that you noticed while putting this report together?

JOSH LEVIN: Well, 2020 has been an incredible year of growing consciousness around social issues. And a lot of those issues are kind of inseparable from this prison industrial complex. People don't realize how big it is. The United States has the highest incarceration rates in the world. And in fact, there are over 4,100 private companies who are involved in that industry. And that includes selling goods and services to prisons, utilizing prison labor to produce products that we use every day, lobbying for more of these get tough on crime rules.

And then, on the positive side, you have companies who have made very public commitments to hire the formerly incarcerated companies, such as Target or Starbucks and others, giving people a second chance. So it's really a big issue. And people are increasingly concerned. And we've been hearing a lot from the marketplace and clients, figuring out-- trying to figure out what they can do about this. And so, we set out to create the world's first overall benchmarking and ranking of all the companies involved in this system so that people could apply it to their investments and really vote with their dollars.

SEANA SMITH: And taking a look at those industries, you found that industrials and materials sector had the most number, I guess, of companies here that profit from mass incarceration, that profit from prison labor. Can you give us some of those names within those sectors of companies that are, in fact, involved with this?

JOSH LEVIN: The numbers are huge. And I think what's most interesting, because people don't necessarily know or identify with a lot of those companies, is that they end up in the supply chains of larger consumer-facing companies that we deal with every day.

For example, Walmart had made a public commitment to ensure that they were not involved in any of these prison-related industries. But then they eventually got called back and had to walk that back and they got pulled out of this benchmarking because it turned out that they had a bunch of vendors in their supply chain who are also selling to prisons.

You have even the likes of Amazon selling facial recognition technology to ICE. You have companies making shackles and all kinds of everyday brand name companies that that we deal with on the consumer side are actually feeding into this system.

SEANA SMITH: Do you feel like this is a time when there's more and more awareness to issues like this? And if you want to make a difference, now is the time? Because it really is-- it seems to me, at least, that there's heightened awareness around issues like this, especially after what we saw play out in 2020. And it is drastically different than what we were looking at even just a year ago.

JOSH LEVIN: Yeah, I mean, listen, I've actually been-- I started working on these issues 25 years ago in New York with the Rockefeller drug laws and the incredible levels of incarceration. This really is a racial justice issue. It is a longstanding stain on the United States. And it is both sad how long it's taken, but also incredibly exciting that this has now become, frankly, a bipartisan issue, which is pretty unprecedented.

And the general public has an elevated awareness and sensitivity to racial justice issues. And I think that people are fed up with supporting these types of systems and in supporting companies who are promoting them in order to make a profit. And the other piece of awareness, which is really key here, is growing awareness of ESG and voting with your dollars, and that you can apply your values to your investments, which has put an incredible amount of pressure on, for example, the private prison companies, so companies that are running prisons and immigrant detention centers for profit.

Their cost of capital has just skyrocketed due to public campaigns that have resulted in investment dollars and loans being yanked from them. And their share prices have plummeted. So the awareness that finances the new politics and the concern around these issues of race and justice and criminal justice have come together to really hit this industry hard.

SEANA SMITH: All right, Josh Levin, co-founder of OpenInvest, thanks so much for joining us today.

JOSH LEVIN: Thanks for having me.