Social bond issuance is lagging behind that of green bonds, but ESG investors with social preferences could also achieve their objectives via green bonds.
“Green bonds are by definition targeting social impacts, as preserving the environment has no other goal than preserving the conditions that make life possible for humankind on our planet,” said Bertrand Rocher, co-head of fixed income at Mirova.
“The ultimate goal of green bonds is to help investors fund projects and assets that will generate a positive impact on the environment, with the final aim to make sure Earth remains habitable.
“Beyond that very obvious goal, allocating capital to green bonds is also a way to ensure that low carbon assets deliver more precise social co-benefits, such as decent working conditions and positive social spillovers, like community revitalisation through supporting local business value chains, in addition to access to drinkable water, affordable energy, decent life standards and more efficient mobility infrastructures.”
Rocher also cited analysis by the investment manager, which concludes that 11 UN Sustainable Development Goals relating to social outcomes are addressed by the Global Green Bond Index, namely:
- No poverty
- Zero hunger
- Good health and well-being
- Quality education
- Gender equality
- Clean water and sanitation
- Affordable and clean energy
- Decent work and economic growth
- Reduced inequalities
- Sustainable cities and communities
- Peace, justice and strong institutions
“Of course, the green bonds constituting that index [the Bloomberg Msci Global Green Bond Index Total Return Index Value Hedged Eur] are to a far larger extent addressing environmental themes such as climate or biodiversity, but they do have this social impact too,” Rocher added.
“For example, when General Motors issues a green bond to fund the development and production of affordable electric vehicles, that will contribute to reducing local contamination in US downtowns.”
Figures from the Environmental Finance Bond Database and S&P Global Ratings show that $309.81bn (£247bn) and $95.49bn of green and social bonds were issued in the first half of 2023 respectively.
Chloe Cheung is a senior features writer at FTAdviser
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