Taking a social approach to global bond markets

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Social bonds are making an increasingly important contribution to new growth in the sustainable debt market. Here, Insight Investment charts the development of this dynamic sector.

The sustainable debt market has seen extraordinary growth recently with overall bond issuance almost doubling from US$326bn in 2019 to US$608bn in 2020.1 While green bonds2 make up the majority of total issuance, social bonds have contributed significantly to the new growth in the sustainable debt market.

What can social bonds offer sustainable investors?

Social bonds are fixed income instruments whose ‘use of the proceeds’ are entirely dedicated to projects or activities that promote improved social welfare and positive social impact directly for vulnerable, marginalised, underserved, or otherwise excluded or disadvantaged populations.

They often target essential services such as healthcare, education, financial services, affordable housing, and basic infrastructure such as sanitation, transport, and clean drinking water. The wide scope of potential projects makes social bonds a particularly flexible option for responsible investors looking to align their portfolio with specific social issues or themes such as the United Nations Sustainable Development Goals.3

The volume of global social bond issuance jumped nine-fold in 2020 to US$164.9bn.4 This surge was largely attributed to COVID-19 and increased the focus on healthcare, research and development and welfare responses, as the pandemic encouraged bond issuers to look for more strategic ways to address health and social issues.

Governments seeking to help their societies weather the pandemic-induced downturn have been the biggest issuers of social bonds. The launch of the European Union’s Support to mitigate Unemployment Risks in an Emergency (SURE) scheme was the largest example of this. Designed to protect jobs and incomes affected by the COVID-19 pandemic, social bonds issued under SURE aim to finance national short-time work schemes, and other similar measures to preserve employment and support incomes, notably for the self-employed, and some health-related measures.

The scheme is financed entirely through social bonds issued in debt capital markets and has the capacity to provide up to €100bn in loans to EU member states.5

On the back of record 2020 issuance, 2021 social bond issuance has been robust. Nearly US$150bn worth of social bonds have come to market in the first half of the year with the EU’s SURE programme ultimately expected to account for social bond issuance of up to €100bn.6 Government and supranational entities continue to make up the majority of issuers and are likely to remain a key source of issuance in the near term as societies across the globe continue to weather the negative social effects of COVID-19.

Emerging markets focus
Emerging markets also look set to contribute to further growth of global social bond issuance with a host of emerging market countries debuting issuance in 2021. Benin saw strong demand for its €500m social bond7 that will allocate proceeds to broaden access to potable water in the country while Chile, Mexico and Slovenia were among other countries that issued social debt this year. Looking ahead, Ghana already has plans to issue US$2bn in social bonds8 to refinance debt that was previously raised to expand secondary education, while South Africa and Kenya look set to follow up with their own issuance.
Looking ahead

Although the pandemic has driven much of the social bond market growth in the previous year, it has also allowed governments and companies to grow more comfortable using social debt as a tool to address societal issues. Many of those issues will continue to exist after the immediate effects of the pandemic and issuers will look to the flexibility of social bonds to address a variety of societal issues such as hunger, education, employment, infrastructure and housing.

Important information


GE668651 Exp: 23 February 2022

¹ S&P Global Market Intelligence. The ‘S’ in ESG here to stay after pandemic-induced surge in social bond sales. 29 July 2021.
² Green bonds fund projects that foster a net-zero emissions economy, protect the environment or improve resilience and adaptation to climate change.
³ https://sdgs.un.org/goals 
⁴ Environmental Finance Bond Database as at 27 July 2021.
European Commission. SURE. As at May 2021.
⁶ NatWest. The EU largest social bonds issuer through its SURE programme. 22 March 2021.
⁷ Bloomberg. Benin reaps lowest cost yet with Africa’s first social bond. 16 July 2021.
⁸ Impactinvestong.org. Government of Ghana proposing Africa’s first social bonds with US2bn sale. 09 July 2021.

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