Social Bonds History & Market Today

What is IFFIm and what role did it play in creating the social bond market?

The first bond recognisable as a labelled social bond was issued in November 2006 by the International Finance Facility for Immunisation (IFFIm); a $1bn five-year offering of Vaccine Bonds. IFFIm is a supranational organisation created to accelerate the availability of long-term funds for health and immunisation through the GAVI Alliance in 70 of the world’s poorest countries. The GAVI Alliance (formerly the Global Alliance for Vaccines and Immunisation) was founded in 2000 as a public-private partnership. IFFIm’s bond programme complements committed grant funding from 10 mainly European governments. As of August 2020, IFFIm had issued around 6.2 billion dollars in Vaccine Bonds in 35 tranches.

How did supranationals develop the social bond market?

Supranationals were instrumental in driving the social bond market forward from 2013-14, creating dozens of themed bond programmes (see list) and actively issuing social products under a combination of public issues and private placements. As well as issuing in sizable volume, they guaranteed social bond issuance or acted as sole or anchor investors in social bonds by third-party issuers in emerging markets. They also issued social themed bonds in response to reverse-enquiry by institutional investors.

What additional routes has the social bond market taken to grow?

• Issuance spread into the government agency world in 2015: Spanish development agency ICO sold EUR1bn social bonds to finance SMEs in regions of Spain with lower per capita GDP than the national average. Italian cognate CDP sold Italy’s first social bond (EUR500m) in 2017.
• In the banking sector, social issuance is growing slowly. Issuance to-date has emerged in covered, senior unsecured, senior preferred and senior non-preferred format.
• In the corporate sphere, Starbucks sold Corporate Sustainability bonds in 2016 and 2017 targeting sustainable coffee supply-chain programmes; Danone’s EUR300m social bond in 2018 was the first multinational offering sold under the Social Bond Principles. In August 2020, Alphabet, Google’s holding company, issued a $10bn multi-tranche bond, of which $5.75bn were sustainability bonds, the largest sustainability or green bond issued by any company.