The Global Market for Social Bonds

Social bonds are a rapidly growing part of the international investment market, allowing investors to help fund projects with positive social outcomes. These include affordable housing, infrastructure, education, and health care.

They are part of the wider sustainable-finance market. ANZ believes the Covid-19 pandemic is accelerating their popularity and changing how these instruments are viewed in terms of their impact and viability as an investment vehicle.

For the first three quarters of 2020, USD 72 billion of social bonds were issued globally. That was up from USD 19 billion for all of 2019, according to Bloomberg New Energy Finance. Total issuance of Green, Social and Sustainability Bonds rose to USD341 billion up to 30 September 2020 (BNEF), compared with USD 329 billion for all last year.

This increase has been driven by the adoption of environmental, social and governance factors by investment managers when assessing their investment portfolios.

A landmark issuance occurred in late October when the European Commission issued a 17 billion-euro social bond.

It will help businesses in economic difficulty to reduce employee hours whilst still employing them full-time; and will assist with health-related measures in the workplace.

Social Bonds in the New Zealand Market

An example of the potential in New Zealand is the Wellbeing Bonds issued by government housing provider Kāinga Ora to fund investment in new or upgraded sustainable social housing. $4.1 billion of the bonds have been issued, with ANZ acting as joint lead manager for $3.6 billion of those bonds.

They’re helping Kāinga Ora further embed environmental and social considerations across its core activities and opens opportunities for investors in New Zealand and globally to access sustainability-focused assets.

Relatively small sums can also be raised. An example is the G-Fund Social Investment Bond – a NZ$6,000,000 bond that provides six years of funding for the Genesis Youth Trust. The Trust works with at-risk youth and their families; combining social work, youth mentoring, family therapy and counselling services to promote positive lifestyle changes.

We believe the growth in popularity of social bonds will continue after the impact of the pandemic fades, due in part to the increased awareness we are seeing of the social issues caused by factors such as inadequate housing and poverty.

Covid-19 set the scene for this asset class to demonstrate its relevance and emerge – finally – as a mainstream solution to a variety of social and investor needs.

By Dean Spicer – Head of Sustainable Finance, ANZ NZ Ltd.
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