Financing the Sustainable Recovery: Social Bond Issuances Surge

The Green Bond Bulletin of NN Investment Partners provides excellent insight into the Green and Social Bond markets. In their article from June 30, 2020, NN Investment Partners report on recent developments in the Social Bond and sovereign Green Bond markets in light of the COVID-19 pandemic. They highlight the surge of Social Bond issuances by government agencies and supranational organizations to raise finance for recovery efforts. In many instances, the proceeds of these bonds are used to finance healthcare-related projects and to preserve jobs in struggling micro, small and medium-sized enterprises. This trend has lifted the Social Bond market to a new level, though it is expected that this growth will only continue if the market manages to attract a wider range of participants and issuers and advances transparency through better impact reporting.

Further, the article presents ongoing developments in the sovereign Green Bond market and raises questions concerning two new structures for Green Bond issuances observed in Germany and Denmark. Issuing Social and Green Bonds can indeed be an effective approach for crowding in a new set of private investors for financing the sustainable recovery efforts of national governments and supranational organizations. In order to attract impact-oriented investors in the long-term, bond issuers need to provide transparency about the use of proceeds, report on intended and achieved impacts, and ensure that projects or enterprises financed through Social Bonds are not causing environmental harm and green projects financed through Green Bonds do not cause social controversies.