Social Bond
IntermediateA social bond is a bond whose proceeds are used to finance projects with positive social outcomes, such as affordable housing, healthcare, education, employment or access to essential services, often for specific target groups.
Social bonds follow a similar model to green bonds, but focus on social rather than environmental benefits. The issuer commits to using the money for eligible social projects and reporting on how it is spent and what it achieves.
The International Capital Market Association publishes the Social Bond Principles, which set out guidelines on the use of proceeds, project selection, management of proceeds and reporting. Eligible projects should address a social issue and benefit specific populations, such as people on low incomes, people with disabilities or underserved communities.
Social bond issuance rose sharply in 2020, as governments and development institutions raised money to respond to the COVID-19 pandemic. The European Union’s SURE programme, which funded job support schemes, was one of the largest social bond issuers.
For example, a housing association might issue social bonds to build affordable homes for families on low incomes.
Sustainability bonds combine green and social projects in a single bond. As with green bonds, critics warn that impact can be hard to measure and labels can be misused.
For worked examples and full lessons, visit notesbysara.org.