Social bonds fund COVID-19 response

HSBC has helped governments, development banks and commercial banks around the world raise USD19.9 billion to support communities affected by the COVID-19 crisis.

The bank has played a lead role in 11 social and coronavirus relief bonds so far in 2020, with proceeds earmarked to support responses to the pandemic.

These include boosting medical supplies, providing loans to companies and small enterprises adjusting to the more challenging business environment, and funding projects aimed at combatting the social and economic impact of the virus.

Farnam Bidgoli, Head of Sustainable Bonds, Debt Capital Markets EMEA, HSBC, said: “Social bonds allow investors to make an impact in addition to a financial return. Issuance has surged as borrowers raise funds to help governments, businesses and companies weather the effects of the global pandemic.”

Social bonds raise capital for projects with social benefits, such as providing access to clean water and energy, and projects that target specific social challenges such as COVID-19.

They are distinct from green bonds, which raise capital for projects with environmental benefits, while sustainability bonds fund a combination of green and social projects.

Recent issuances supported by HSBC include:

• Nordic Investment Bank’s EUR1 billion three-year response bond, raising capital to alleviate the effects of the pandemic and support recovery across the Nordic region
• Inter-American Development Bank’s (IADB) USD4.25 billion, three-year Global Sustainable Development bond. This will support IADB’s member countries, including assistance with disease monitoring, testing and public health services
• Bank of China Macau Branch’s HKD4 billion social bond, with proceeds earmarked to help small firms hit by a sharp drop in tourism

HSBC has also helped to support recent issuances by The World Bank, The Council of Europe Development Bank, and the South Korean bank Shinhan.

Social bonds were first introduced in 2015 and remain unfamiliar to some investors, but COVID-19 means their profile is rising fast, according to Luying Gan, Head of Sustainable Bonds, Debt Capital Markets Asia-Pacific, HSBC.

HSBC’s expertise has placed it at the forefront of the debate about social bonds, she said. The bank was ranked as the largest green, social and sustainability bond market underwriter in the 2019 Environmental Finance Bond Database.

She added: “We are playing a pivotal role in the current environment, with issuers turning to us to help them leverage the capital markets to secure funding and liquidity and promptly respond to their COVID-19 needs.”