Social bonds take stage through COVID-19

International capital markets have been swift to expand the scope of social bonds to cover the fallout from the pandemic. According to a trio of ANZ experts, it could change how these instruments are viewed in the future, in terms of their impact and viability as an investment vehicle.

“[Traditionally] social bonds have tended to be aimed at a cohort of vulnerable people,” Katharine Tapley, Head of Sustainable Finance at ANZ said on podcast.

 “Whereas in response to this crisis and to stimulate this market activity, there's been a focus on allowing the proceeds to be used for all cohorts of people in recognition that actually this pandemic does not distinguish,” she said. “Everyone is vulnerable at the moment.”

Tapley made the comments ahead of World Environment Day on June 5, on a call with Dean Spicer, ANZ Head of Sustainable Finance – New Zealand and Stella Saris Chow, Head of Sustainable Finance – International.

“The ability of the market to react so quickly and adapt its approach has been particularly impressive,” she said.

You can listen to an edited version of that call on the podcast below, and click HERE to listen to the first half of the discussion.

Social bonds, historically a small part of the broader sustainable-finance market, have grown significantly, led by multi-lateral organisations and banks.

“I think what's interesting about these bonds in particular is that if you look at green bonds, it has been really a climate discussion,” Saris Chow said. “But this [pandemic] has really brought that whole social discussion to the fore in terms of how we combat the inequality and reduce poverty.”

In New Zealand, the country’s largest issuer of sustainable bonds is government housing provider Kāinga Ora, with its wellbeing bond programme. This is expected to continue, according to Spicer, as the agency steps up its building program in response to increased demand for social housing.

Impact

The pandemic is having a significant impact on the public’s home and professional lives. How that ultimately will affect energy demand, government policy and commercial investment around infrastructure and commercial development remains to be seen.

“It will be interesting to see the long term implications of that come out of this pandemic in terms of how we work and whether that will reduce energy demand further,” Saris Chow said.

While the pandemic has some way to play out, many are rethinking long-held economic, business and social models.

“I'm hopeful that this experience will see some innovative thinking go into the way we do business, the way we operate, as well as how we recover economically from the setback,” Spicer said.

“I think there is a silver lining there. And I think as a bank [ANZ is] in a good position to try and help facilitate that discussion and find a way forward.”

You can hear more on the podcast above.

Sharon Klyne is an Associate Director, Communications at ANZ Institutional