As the pandemic has gained momentum, multilateral development banks, government agencies and even the European Union have rushed to the social bond market to raise funds to support their crisis-relief efforts.
So far, however, it is a story in which western commercial banks have not played a leading role – except, of course, as advisers and bookrunners for other issuers.
This is surprising and disappointing. It has been clearly demonstrated that there is a market for these bonds, whether from public or private-sector borrowers. The few banks that have tested the water – led by Bank of America, BBVA and CaixaBank – have received an enthusiastic welcome from investors.
Why have their peers been slower off the mark? In a pre-Covid era, there was some excuse for focusing on the more fashionable green bond market rather than trying to pull together a social deal that would meet the stringent requirements of the International Capital Market Association (Icma).
'Target population'
Now, that argument no longer holds water. For one thing, Icma made it clear as early as March that anyone adversely affected by the pandemic could qualify as a 'target population' for the purposes of social bonds – which lowered that particular bar so far as to make it almost negligible.
What