The coronavirus pandemic has encouraged more investors to put their money in financial instruments that can have positive social outcomes.

Social bonds, which have been gaining traction in recent times, is expected to emerge as the fastest-growing segment of the sustainable market this year, even outpacing green bonds and the global fixed income market, according to S&P’s latest analysis.

“The COVID-19 pandemic has not turned issuers’ or investors’ attention away from sustainable finance, but rather interest seems to be growing,” the ratings agency said in a report released on Monday.

“Corporations and financial institutions will become more active in the social bond market as the pandemic accelerates private issuers’ interest in social considerations,” it added.

Social bonds provide financial support for projects that can have a positive impact on the lives of people or on society. They are used as loans for small and medium enterprises (SMEs) that support employment growth or for individuals who are looking for affordable housing.

In March 2020, the International Capital Markets Association (ICMA) highlighted the important role of social bonds in helping fight the coronavirus pandemic. It also issued some guidance on what projects should be eligible for financing, which can include coronavirus-related healthcare and medical research, vaccine development and medical equipment investments, as well as those that help address the growing unemployment caused by the pandemic.

Data shared by Morgan Stanley indicated that the social bonds’ share of the market is growing rapidly, with some $32 billion of social and sustainability bonds issued in April 2020 alone, outpacing green bonds for the first time. 

Much of this rapid growth, according to S&P, can be attributed to the effect of the coronavirus pandemic, which has spurred the issuance of social bonds to finance both public and private responses and create a positive impact, especially for target populations.

“The increased scope of projects eligible to be considered under the social bond designation likely led issuers, particularly supranationals, to become more active in the space,” noted S&P.

Green bonds have traditionally ruled the sustainable finance market, with 2019 recording a $257 billion in green bond issuance. 

“However, the ensuing COVID-19 crisis has already started turning this tide. As the severe economic implications of the pandemic generally slow the issuance of bonds, social bonds are stepping into the spotlight as many investors view them as an innovative solution to addressing pandemic-related issues,” wrote Meaghan Farrell, an associate at Norton Rose Fulbright.

According to Sabrin Rahman, HSBC regional head of sustainability for Middle East, North Africa and Turkey (MENAT), the pandemic could serve as a “catalyst” for sustainable investing.

She noted that since the start of the outbreak, the use of social bonds has been gaining traction in international markets, with a focus on responses to the pandemic.

“So far, we count $42.4 billion of bonds issued in response to COVID-19, of which $6.7 billion have been in social bond format,” Rahman said in a new research note.


A lot of investors have entered the sustainable investing space since the outbreak. Among these, the International Finance Corporate (IFC) completed last March its largest social bond issuance since the launch of its social bond program in 2017, to finance its response to the coronavirus.

Following suit is the African Development Bank (ADB), which launched a $3 billion “Fight COVID-19” social bond, said to be the world’s largest dollar-denominated social bond transaction to date.

In April 2020, Guatemala became the first nation to issue a sovereign social bond aimed at financing the fight against coronavirus. The funds were used for health infrastructure improvements and food security, support for businesses and professionals, and preventative health and medical practices.

“As the crisis unfolds, we believe a number of supranational, government agency and corporate COVID-related issuances will likely follow. These recent issuances indicate that the pandemic has not turned issuers’ or investors’ attention away from sustainable finance. In fact, interest in this space seems to be expanding,” said S&P.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

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