Social bonds, like green bonds, possess similar elements of traditional bonds in terms of risk, structure and return. While green bonds are used to finance projects with a positive environmental impact, the funds raised from the listing of a social bonds are used to finance new and existing projects with positive social projects and society.
It is required under a number of voluntary frameworks to obtain a second-party opinion on the eligibility and structure of a social bond to ensure that the bond is in line with market expectations and industry best practices. This second-party appraisal helps to generate investor confidence in the issuance of a social bond as the second-party opinion acts as validation. The aim of the social bond market is to enable and develop the role that debt markets can play in funding projects that address global social challenges.
Categories of eligible social projects providing and/or promoting:
- Affordable basic infrastructure (e.g. clean drinking water, sewers, sanitation, transport, energy)
- Access to essential services (e.g. health, education and vocational training, healthcare, financing, and financial services)
- Affordable housing
- Employment generation including through the potential effect of SME financing and microfinance
- Food security
- Socioeconomic advancement and empowerment
Examples of target populations include those that are:
- Living below the poverty line
- Excluded or marginalised populations and/or communities
- Vulnerable groups, including as those displaced as a result of natural disasters
- People with disabilities
- Migrants and/or displaced persons
- Underserved, owing to a lack of quality access to essential goods and services