30 March 2020
The International Finance Corporation (IFC) launched its Social Impact Notes in July 2019, to facilitate retail investors' participation in the sustainability bond market.
The notes are available in denominations of $1,000, making it a simple and accessible product for retail investors and will be available in various tenors and in fixed- or floating- rate formats. They are sold through a nationwide network of over 500 broker-dealers in the US.
Investors not only receive back their principal and make a financial return, but also support various social projects, which provide jobs and access to essential services in emerging markets. But the credit risk they take on is limited to that of the AAA rated IFC, the world's largest development institution focused on the private sector.
The notes are part of the IFC's Social Bond Programme, launched in 2017. This programme has so far raised about $1.5 billion through 28 social bonds from a diverse range of institutional investors, such as pension funds, state treasuries, and commercial banks. The proceeds have financed more than 100 projects in healthcare, education, agribusiness, and other sectors. IFC launched the retail notes programme in collaboration with the Haitian diaspora in Miami. The debut trade, which raised $2.94 million, will focus on social projects that the IFC is undertaking in Haiti.
The aim of the initiative is to give retail investors an opportunity to partake in impact investing at scale, said Denise Odaro, the IFC's head of investor relations. "Well-structured commerce directed at the 'base of the pyramid' ... can be financially viable for businesses and equally beneficial for the recipients of the services," she added.
The initial focus on Haiti is in line with the IFC's strategy of long-term support to help countries 'transition out of fragility', including private sector solutions, such as scaling-up investments in small and medium-size enterprises that are essential to create jobs and spur economic growth.
Future issuances will be influenced by discussions with investors and market conditions, Odaro said.