LONDON, Oct 19 (Reuters) - The volume of social bonds issued
in 2020 has jumped eight-fold from a year ago, as interest in
ethical investment rises and more governments and agencies see
them as a key funding tool for specific projects.
Issuance of social bonds, a type of debt that channels
proceeds to specific socially beneficial projects, has surged to
$85 billion this year so far, compared with $10.6 billion in the
same period of 2019, according to Refinitiv data.
While still much less-prevalent than green bonds, social
bonds' popularity has jumped as the COVID-19 crisis led
investors to place more emphasis on the "social" component of
environmental, social and governance-driven (ESG) investing.
"The pandemic has strengthened the link between humanitarian
and economic crises, so you saw a sharp increase in bonds
targeting societal issues from April onwards," said David
Katimbo Mugwanya, a fund manager at EdenTree Investment
French government agency Cades, which manages debt from the
social security system, and unemployment insurance fund Unedic
have been the biggest issuers of social bonds this year at a
combined $22 billion, using them to fund projects aimed at
Other issuers include governments, supranational
organisations such as the Asian Development Bank, and an
increasing number of companies.
Bank of America issued a $1 billion bond in May, the
proceeds of which will be lent to not-for-profit hospitals,
nursing homes and manufacturers of healthcare equipment. It
separately issued a $2 billion sustainability bond, aimed at
providing more affordable finance to Black and Hispanic-Latino
Spain's CaixaBank issued a 1 billion euro bond
last month aimed, in part, at helping provide more loans to
low-income households to help with healthcare, education and
Social bonds emerged in 2010, when Social Finance, a British
not-for-profit consultancy, raised 5 million pounds ($6.5
million) to help reduce reoffending among short-sentenced
offenders leaving prison in Peterborough, eastern England.
In 2017, the bonds were judged to have helped reduced
reoffending by 9%, above the project's 7.5% target, so the
Ministry of Justice and a fund run by Britain's national lottery
paid investors back their money plus a return equalling 3% a
Since then, social bond issuance has increased relatively
steadily globally, until this year's sudden leap.
Development banks have used social bonds to fund COVID
spending, the data shows, while the first social bond of the
European Union's SURE unemployment scheme is expected as early
as Tuesday. The up to 100-billion-euro SURE scheme is one of the
coronavirus recovery plans for EU members that offers loans as
"Investors are likely to continue to show appetite for that
type of issuance, with a preference for companies that use it
to fund long-term solutions to the crisis, like a vaccine for
example," Katimbo Mugwanya added.
Companies like British healthcare property owner Assura
Group and luxury fashion house Burberry also issued their first
social and sustainability bonds respectively in September.
Burberry's sustainability bond aims to finance projects such
as ensuring its cotton comes from sustainable sources and
improving employment conditions for manufacturing its products.
($1 = 0.7748 pounds)
(Reporting by Clara Denina, additional reporting by Yoruk
Bahceli and Leigh Thomas, graphics by Pratima Desai; Editing by