The growth of the sustainable debt market in recent years has shown how investors are increasingly building positive impact themes into their investment considerations and analysis. However, while the green bond market has gained in maturity and liquidity, social bonds have emerged as a new growth area in the impact debt capital markets.
Through 2020, there has been an uptick in Covid-19 related social bonds, where supranationals, sovereigns and agencies seem to be leading the way. For example, in March 2020, the International Finance Corporate (IFC) issued its largest social bond ever to finance its response to the coronavirus.
The increased scope of eligible projects is likely to encourage issuers to become more active in the space. Additionally, the diversification of issuers is likely to evolve in a similar manner to the green bond market, with supranationals leading in the market’s early years and other investor types following as more and more issuers look to demonstrate support for social issues while delivering positive investment returns.
Joshua Kendall, head of responsible investment and stewardship, Insight Investment.