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Large inflows to ‘social bond’ market linked to Covid-19

social_investing_social_bondsSocial bonds – instruments comparable to green bonds – saw a €20 billion injection in just a few weeks, which experts say was linked to greater social awareness among investors during the Covid-19 outbreak.

From the start of April until recently the €20 billion raised predominantly came from France, Spain, Italy, the Netherlands, Japan and Africa, increasing the size of the market by 43% to €66 billion.

NN Investment Partners, which carried out the study, said the Covid-19 crisis caused the ESG-investing scope to extend beyond green bonds and sustainability, to social bonds after acceptance of the “wide-ranging social implications” of Covid-19.

The study found that the majority of investment into social bonds over the last quarter was aimed at supporting smaller businesses, including job preservation.

However, in the sustainable fixed income asset class, the social bond market is still “comparatively small” and dominated by few participants.

Jovita Razauskaite, a green bonds portfolio manager at NN Investment Partners who does not hold social bonds in the firm’s green bonds strategy, said: “If the social bond market is to grow further and diversify, it will need to attract a broader range of participants and issuer types.

“Once the pandemic is behind us, this market could continue to grow. Corporate issuers that wish to address fundamental social issues across their businesses and supply chains could increasingly seek financing via social bonds.”

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