ESG in Fixed Income Global Series - Sustainability-Linked Products and Social Bonds roundup

Channels: Green Bonds, Investment

Companies: IFC, Orpea, BNP Paribas, MSCI, NN Investment Partners, Amundi

People: Xuan Sheng Ou Yong, Esohe Denise Odaro, Steve Grobet, Howard Sherman, Bram Bos, Alban de Faÿ

Environmental Finance's Sustainability-Linked Products and Social Bonds Conference took place across two half-days on 16 and 17 June 2021 – it is the third of six events in the ESG in Fixed Income Global Series

Day one focused on social bonds and their potential for growth, particularly as the world looks beyond last year's burst of Covid-19 related social bonds that were issued in response to the crisis.

In the opening panel of the day, Esohe Denise Odaro, head of investor relations at International Finance Corporation (IFC), said investors are keen to support social bonds even in "tumultuous times", pointing to the IFC's success in issuing a $1 billion bond at the beginning of the pandemic.

The $1 billion social bond was issued on the same day that the World Health Organization declared the coronavirus outbreak a global pandemic on 11 March 2020. The trade attracted a final order book of over $3.4 billion.

Throughout the day, social bond impact reporting was mentioned frequently and described as a "necessity" for social bond issuance by speakers.

Quotes from the conference: 

Esohe Denise Odaro, head of investor relations at International Finance Corporation (IFC): "Transparency is more natural for us [at the IFC] because if you are a financial institution then you should know who you are lending to and the purpose of that loan ... So, for us we think the reach numbers are important and are as equally accessible to everyone. Anyone can understand the number of hospital beds, the number of patients, the number of students, those are very accessible to everyone."

Steve Grobet, finance corporate secretary at Orpea: "Social bonds are more difficult to quantify...be prepared to work for several months to set up your framework. It must fit into your CSR strategy...You must find a second party opinion and think about future reporting, auditing and impact reporting."

Bram Bos, lead portfolio manager for green bonds at NN Investment Partners: "The SLB market is still very early in its development...I think [SLBs] can develop into a credible instrument, but they have yet to be tested."

Xuan Sheng Ou Yong, green bond and ESG analyst at BNP Paribas Asset Management, said: "Impact reporting is really necessary for us. If there is no impact reporting, we kick [bonds] out of our social bond universe and consider it a normal bond."

On day two of the conference, which focused on sustainability-linked products, Alban de Faÿ, Amundi's head of fixed income ESG investing said the sustainability-linked bond (SLB) market is set for strong growth and diversification of issuer types.

"There are a lot of SLBs in the pipe[line], a lot of companies want to come on this market," said. "It's a hot sector."

SLBs and green bonds are "complimentary", he continued. "Thanks to these two instruments we know that the sustainable fixed-income market is open for all type of issuers, whatever the sector."

In the last panel of the day, MSCI revealed that it is planning to launch itself as a provider of second-party opinions (SPO) for green and social bonds.

Howard Sherman, head of corporate governance business development at MSCI, told delegates that MSCI "now preparing to enter the market for second-party opinions, initially for green and social bonds and loans".

 

Register to watch the sessions from the Sustainability-Linked Products and Social Bonds event and immediately gain access to the next event in the series. The next event will be the Climate Transition Finance day on 15 September 2021.

All hosted on a single platform, to enable the community to flourish, attendees of the ESG in Fixed Income Global Series have access to presentations live, on the day, and on-demand post-event. Delegates will also be able to use the event platform to network with each other and our partners throughout the year.

If you are interested in partnering with us for these events, please contact Neil Porteous on +44 (0)203 326 6269 or email neil.porteous@environmental-finance.com, to discuss your specific requirements and the opportunities available.

Annabelle Palmer