The lenders increase efforts to achieve sustainable development goals, while directing capital towards health care, education and basic infrastructure.
Global banks and major financial institutions increase their participation in the social bond market, which enhances the role of debt capital in facing social challenges all over the world.
Standard Chartern has recently announced the release of the first 1.1 billion dollars. Revenue is primarily allocated to facilitate lending to small and medium -sized institutions (SMES), including support for women owned by women. Money will also be allocated for health care, education, infrastructure development, and food security initiatives.
The transaction is compatible with the bank’s sustainability framework, which applies environmental and social standards across sensitive sectors. For example, only financial services were extended to customers committed to reducing the dependence of thermal coal to less than 5 % of revenues by 2030.
In 2024, Deutsche Bank released his first social bond, collecting 500 million euros to expand the set of sustainable assets. Revenue will fund housing at reasonable prices and basic services for the elderly population.
In January, the International Financial Company, part of the World Bank Group, collected two billion dollars through its largest social bonds. Money aims to support low -income communities across emerging markets.
Social bonds are organized similar to traditional fixed income tools in terms of risk and return. The main distinction lies in the requirements of legal documents that define how to allocate revenues, ensuring transparency and accountability.
“The increase in the issuance of social bonds is in line with the societal goals of both public and private entities,” says Connor Moore, the international head of the KPMG. “While there are declines and flows in the political environment about sustainability initiatives, they will remain a priority for many institutions. This must lead to more issuance in various regions and sectors.”
“It is worth noting that although the largest part of global investment will be directed towards sustainable energy and infrastructure, many of these projects include a critical social dimension – it is indicated to a fair transition.”
“In other words, unless social issues such as society and the employee are addressed, it is unlikely that projects are likely to advance. This is one of the important courses that social bonds can play in supporting investment in infrastructure.”
According to the United Nations Financing the Sustainable Development Report 2024The Global Finance Gap for Sustainable Development is still vast – estimated at $ 4 trillion annually. While social ties can help fill part of this deficiency, it is unlikely to close them.
