The Issuance of Social Bonds in Response to the COVID-19 Pandemic

Introduction

The launch of the Sustainable Development Goals (“SDGs”) by the United Nations in 2016 brought the world together on a mission to end poverty, fight inequality, and tackle climate change. 

The UN Department of Economic and Social Affairs, stated that the COVID-19 pandemic is affecting all SDGs, including those aimed at reducing poverty and hunger and increasing health, sanitation and economic growth.

In order to facilitate the financing of prevalent social issues and financing of the SDGs a bond market has emerged and deepened to finance or re-finance in part or in full, new or existing eligible social projects. The emergence of this bond market is supported by a growing number of investors who have begun to embed Environmental, Social, and Governance (“ESG”) standards into their investment decisions.

Since the expansion of the ESG bond market in recent years, social bonds have been a small but growing portion of the market. These bonds are used to finance projects or assets that result in a positive social outcome, such as providing financing for employment generation in lower-income regions, social housing projects, and the delivery of healthcare.

With the outbreak of Covid-19, the market demand for social bonds has increased, the International Capital Market Association (ICMA) analysis of the environmental finance database stated that the social bonds issuance for 2020 totalled $11.58 billion as of May 15, compared to just $6.24 billion in the same period of 2019.