What’s happening: social bonds raised more than $ 163 billion this year, more than 10 times the $ 13 billion raised in 2019, according to a report by law firm Linklaters. The coronavirus pandemic was the main driver of exponential growth in the asset class.
“Social ties have emerged as a useful tool in the fight against the pandemic by mitigating the socio-economic impact of the crisis,” said Richard O’Callaghan, partner of capital markets Linklaters.
The European Union was the largest issuer of social bonds, raising $ 47.3 billion in five transactions. Other major fundraisers included the Asian Development Bank, as well as CADES and UNEDIC, bodies that manage France’s social security debt and the unemployment insurance system, respectively. The pair raised more than $ 42 billion on 11 bonds.
Watch the money: at € 17 billion ($ 20.8 billion), the European Commission’s inaugural social bond on Covid will go to its SURE program, which helps EU member states pay the salaries of millions of workers to protect jobs for work.
Investors’ appetite for these bonds has been enormous, as a growing number of asset managers incorporate environmental, social and governance (ESG) considerations into their investment decisions.
The SURE transaction attracted more investor interest than any other bond in history, according to Linklaters, with demand reaching EUR 233 billion ($ 285 billion) – almost 14 times the amount the Commission intends to raise.
It is not just governments that are taking part in the action. Citigroup raised $ 2.5 billion from a single debt sale in October to build affordable housing in the United States, the largest social obligation from a private sector player, according to the bank.
Social bonds follow their more established cousin: green bonds, which have been around for more than a decade and finance green projects that combat pollution and climate change. These bonds raised $ 227.6 billion this year in more than 680 sales, a 21% increase from 2019, according to Linklaters.
The growing appetite of investors for these assets helps finance play a more important role in supporting improved outcomes for humans and the planet. But whether or not all this money makes the whole world a better place is difficult to assess.
See here: Even the European Union recognizes that its ability to report the impact of the funds allocated through the SURE program will depend to a large extent on the “quality and granularity” of the information provided by the Member States, over which it has no full control. .
“The very fact that ‘social impact bonds’ are now a serious (though still small) and seemingly permanent feature of global capital markets means that the sector needs to become serious about defining what ‘social’ means and how can measure the best, ”said Professor David Kinley, Professor of Human Rights at the University of Sydney. “It’s the result that ultimately interests us.”
Looking ahead: whether or not it works as promised, social ties are here to stay. The European Commission’s SURE program alone has the potential to issue social bonds of up to EUR 100 billion ($ 123 billion).
And given the persistent economic impact of the pandemic, the issues that these funds are meant to address will not go away any time soon. “I don’t think we will see a decrease to the same levels in 2019 [in 2021]”O’Callaghan said.
Could companies make vaccines mandatory?
Coronavirus vaccines give pandemic companies hope that 2021 will improve their results.
Companies that have lost billions of dollars in revenue or incurred high costs related to coronavirus restrictions are, of course, eager to get back to business. To do this, some are considering asking their employees to get Covid-19 vaccines.
Wait what? Nearly three-quarters of business leaders reported openness to vaccination warrants in a poll held Tuesday at a virtual summit by the Yale Chief Executive Institute, reports CNN Business colleague Matt Egan.
The debate over vaccination warrants comes as health authorities try to reassure the public about the safety of strikes, which are in the early stages of development in several major economies, including the United States and the United Kingdom, after the use of vaccines. emergency by the health authorities.
Details, details: The question at the Yale Summit did not specify to whom the mandate would apply and several CEOs indicated that they first wanted to see how fast the vaccination rounds go.
However, turning the vaccine into a condition of employment could be controversial and likely to face legal challenges.
“There is some legal uncertainty as to whether you can order a vaccine under emergency use authorization,” said Dorit Reiss, a law professor at the University of California, Hastings. “I suspect that some employers will continue and mandate. It will be challenged and the courts could go in any direction.”
Some companies may see a vaccination warrant as the best way to bring their employees back to factory floors or with customers. David Gibbs, CEO of Pizza Hut and owner of Taco Bell, Yum Brands, said at the Yale summit that it is something his company will analyze, although no decision has been made yet.
It is worth remembering: While employers have the right to establish health and safety conditions at work, companies may need to grant exemptions to employees for medical or religious reasons, according to Reiss.
It follows
Months: Tesla added to the S&P 500
Tuesday: CarMax earnings
Wednesday: New home sales in the US, consumer sentiment
Thursday: Initial claims for the unemployed; US durable goods orders
Friday: The American and European markets have been closed