Green Voices of Nasdaq: How IFC's $1 Billion Social Bond Is Supporting Businesses Amid the Pandemic
Amid the coronavirus pandemic, the Nasdaq’s Nordic & Baltic Sustainable Bond Market has continued to flourish due to our commitment to the environment, society and a more responsible future. With over 250 green, social and sustainability bonds listed, it is a testament to the extensive integration of sustainable practices amongst Nordic & Baltic companies.
Nasdaq’s sustainable bond markets enforce transparency in alignment with internationally accepted standards that makes it easier for investors to invest and manage risk, which goes hand in hand with our overall mission to provide fair, transparent and efficient markets.
In this series, called Green Voices of Nasdaq, we are providing a platform that allows our sustainable bond issuers and investors to share their stories. This story shines a light on how the International Finance Corporation moved swiftly after the COVID-19 pandemic was declared, to establish its largest-ever social bond, which garnered significant investor interest, including from Länsförsäkringar AB (Sweden).
As cities and countries around the world continue to navigate the novel coronavirus pandemic, the International Finance Corporation (IFC) jumped into action by issuing its largest-ever social bond to support the private sector and jobs in developing countries. The response to the $1 billion social bond, which is disclosed on the Nasdaq Sustainable Bond Network, was “overwhelming” and a clear reflection of investors’ keen interest in addressing social issues, according to IFC, a sister organization of the World Bank and member of the World Bank Group focused on the private sector in emerging markets.
“We want to support societies and businesses in the fight against this pandemic. It is a global challenge and crisis that needs to be tackled on all continents,” said Kristofer Dreiman, head of responsible investments at Swedish mutual insurance company Länsförsäkringar AB. “Long term, private capital can complement public efforts in order to mitigate the negative impacts on public health, labour markets and the economies. IFC’s $1 billion social bond aligns with our focus as a responsible investor and our ambition to achieve sustainable value creation.”
As the pandemic rapidly spread across the globe earlier this year, IFC moved swiftly, issuing $1 billion of notes with a three-year maturity designated as social bonds. The issuance followed IFC’s launch of an $8-billion package to support clients affected by the global outbreak of COVID-19. The bulk of the financing will go toward client banking institutions, enabling them to continue to offer trade financing, working-capital support and medium-term financing to private companies struggling with disruptions in supply chains.
John Gandolfo, IFC Vice President and Treasurer
“Our experience from past shocks, including the global financial crisis in 2008, has taught us that keeping companies solvent is key to saving jobs and limiting the economic damage. Speed is of the essence,” said John Gandolfo, IFC Vice President and Treasurer. “The pandemic is causing far-reaching economic disruption, including in emerging markets and developing countries. Supporting the private sector is critical to restoring economic stability and preserving jobs.”
Financing Social Initiatives
IFC has fully deployed the $2 billion allocated under the trade-finance envelope of the COVID-19 facility, much of which is helping micro, small and medium-sized enterprises (MSMEs), a major source of employment in developing countries. IFC has committed a further $1.9 billion to projects in every region in which it operates. This financing is being used for a range of purposes, from bolstering healthcare providers to helping the battered tourism sector and keeping viable businesses afloat, thus saving jobs.
For Länsförsäkringar, investing in IFC’s social bond aligns with the integration of ESG factors in its strategic allocation analysis and investment decisions. Länsförsäkringar has prioritized five of the United Nation’s Sustainable Development Goals linked to its asset management activities, including number 3 health and wellbeing, number 7 affordable and clean energy, number 11 sustainable cities and communities, number 13 climate action and number 15 life on land.
Kristofer Dreiman, head of responsible investments at Länsförsäkringar AB
“The virus outbreak and its multi-dimensional impacts on our societies, the environment and economies have strengthened our already strong conviction to consider and integrate ESG factors,” said Kristofer Dreiman at Länsförsäkringar AB. “From this social bond issued at the outset of the global pandemic, we focus on and aim to achieve measurable social development outcomes, especially in relation to SDG 3 about health and wellbeing.”
Phase Two Response
Looking ahead, IFC plans to support the private sector through the restructuring and recovery stages of the World Bank Group’s pandemic response, with the goal of helping countries rebuild better so they can achieve an inclusive, sustainable, resilient recovery.
Tom Ceusters, IFC Director, Treasury Market Operations
“On the funding side, the project pipelines determine the size of our social bond issues,” said Tom Ceusters, IFC Director, Treasury Market Operations. “Our goal is to continually provide much-needed liquidity to the nascent sustainable bond market and, in tandem our investor relations efforts, focus on proactively educating investors of the benefits of these products as well as leading the dialogue of frameworks and transparency regarding impact reporting to investors.”
Among sustainable bonds, green bonds give investors the opportunity to contribute positively to the fight against climate change, while gaining financial returns. During the past fiscal year, IFC broke through the $10 billion milestone of cumulative green bond issuance, and celebrated the ten-year anniversary of the launch its green bond program. As outlined in IFC’s Green Bond Impact Report, released today, the proceeds of IFC’s green bonds are invested exclusively in climate-smart business solutions in emerging economies.
“Responsible investing is now a mainstream concept, but our mission remains urgent: we have a huge funding gap to bridge if we are to meet the Sustainable Development Goals by 2030. That means turning the billions being invested into sustainable, or green finance, into the trillions,” concluded John Gandolfo, IFC VP & Treasurer.
Nasdaq’s Role in Sustainability
Nasdaq recently launched the Nasdaq Sustainable Bond Network (NSBN), a global platform that aims to increase transparency, comparability and accessibility to environmental, social and sustainability bonds. NSBN displays all documents, data and qualitative information submitted by issuers on an open-to-all website and disseminates the same information in a machine-readable format through proprietary market data feeds, free of charge.
Ann-Charlotte Eliasson, Vice President and Head of European Debt Listings and Sustainable Bonds at Nasdaq, on the state of the market and IFC’s social bond being disclosed on the Nasdaq Sustainable Bond Network.
"So far, the focus on the global bond markets has been on green bonds that address our collective climate challenge. The pandemic has driven a progression toward wider coverage of the UN Sustainable Development Goals and shined a light on the need for investments in projects targeting job creation and access to essential services. In this context, providing visibility for issuers looking to raise funds to mitigate the effects has become even more important, and we believe the Nasdaq Sustainable Bond Network can provide valuable support here. To see IFC, as one of the world´s largest issuers of social bonds, join the platform is a great testament to the value and visibility we are able to offer to issuers and we look forward to continue working with them in the future."
NSBN builds upon the Nasdaq Sustainable Bond Market, which was launched in July of 2015 with a total volume of 740 million euros. In 2017, €1.7bn ($1.9bn) was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016. In November of 2019, Nasdaq’s Nordic and Baltic sustainable debt segments list a total volume of about 13 billion euros. We facilitate infrastructure, monitor issuers and foster dialogue to ensure the continued growth of the markets.
Bonds can be listed on Nasdaq Sustainable Bond Market if a set of criteria is fulfilled. The respective criteria are based on the green and social bond principles (the GBP and SBP), for which ICMA acts as secretariat, and has been developed in cooperation with Sustainalytics, a global leader in ESG research. Issuers that wish to list green, social or sustainable bonds on our sustainable bond market go through the same process as traditional bond issuers. However, the issuer must supply Nasdaq with information regarding the bond or bond framework as well as the third party’s review when applying to list.
To learn more about the listing process, visit our website.
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