The Swedish International Development Agency, sustainable Swiss investment house responsAbility and Danske Bank are joining forces to contribute to the Sustainable Development Goals of the UN 2030 Agenda. Led by responsAbility, they are launching a USD 177.5 million social bond that bundles loans to innovative companies in capital-scarce regions which operate in the financial inclusion, healthcare and WASH (water, sanitation, hygiene) sectors, and that have a measurable, positive social impact. The initiative addresses the increased urgency to act that Covid-19 has evinced.
Zurich, 14 June 2021 - Convinced that targeted private investments can contribute substantially to the development goals of the UN Agenda 2030, Swiss impact asset manager responsAbility Investments, the Swedish International Development Agency SIDA and Danske Bank have joined forces to launch a novel social bond. Through the Social Bond, USD 177.5 million will flow to capital-constrained companies in developing countries. The selected companies' business models are characterized by their products and services achieving a measurable positive social impact. The launch builds on the recent popularity of social bonds in the capital markets and responsAbility's expertise in structuring impact investment solutions at scale, in lending to companies in developing countries and in managing credit risks.
Social bonds are bonds whose issue proceeds benefit projects that address social problems or aim to have a positive social impact. Globally, the focus is on financing affordable housing and combating unemployment (socioeconomic imbalances), as well as - to a much lesser extent - investments in healthcare and education. According to rating agency Standard & Poor's, the issuance volume in 2020 increased eight-fold year-on-year to USD 140 billion.
This initiative responds to the urgency to act in order to achieve the 17 UN Sustainable Development Goals. Even before Corona, the necessary scale and pace of the international response had been lacking. Progress on the SDGs cannot succeed without spirited mobilization of private capital. But this often is a challenge because many investors are risk averse. By creating a structure that fosters the mobilization of private capital, this bond helps to effectively address those issues that need urgent attention. In addition, this bond sheds light on how return-oriented private capital can be used to achieve social impact.
This Social Bond mobilizes capital for the following UN Sustainable Development Goals:
The novel approach of the social bond leverages the strengths of the three partners: the Swedish government through SIDA reduces risks for investors by providing a partial guarantee for the portfolio; Danske Bank uses its market position to place the bonds, i.e., it raises funds by selling the bonds to investors. Impact pioneer responsAbility, in turn, is responsible for selecting borrowers and negotiating the loans, disbursing the funds, and managing the risks over the life of the bond. This structure, then, is a catalyst for the private sector to invest and reap attractive returns while also serving society.
Concretely for this bond, USD 1 of state guaranteed funds has mobilized USD 4 of private investment.
The interest-bearing bond is aimed at institutional investors. It enables investors, such as pension funds, to meet fiduciary duties to their beneficiaries, as the bond yields a return in line with the market. At the same time, the social bond makes a tangible and measurable contribution to addressing or mitigating urgent problems in developing countries. Previously, social bonds focused on a singular topic, such as poverty reduction, economic growth, gender equality, or climate change mitigation. This bond, however, has broad impact across the SDGs: In addition to investments targeting health, it targets those in financial inclusion, climate-smart agriculture, access to clean and affordable energy, clean water, and sanitation.
The investor perspective: “Alecta’s, and other large investors’, investments in social bonds have increased during the last couple of years. As long as we find good structures with credible partners such as responsAbility, we will continue to invest in products that give a stable return and enable solutions to pressing societal challenges. The problem, from our point of view, is that there is a lack of suitable products to invest in, not a lack in capital or will,” said Julian Jonsson, Portfolio Manager at Alecta.
“Social investments like these, particularly in the area of health, resonate well with our purpose as an organization. We are pleased to return to working with responsAbility on these important issues and are looking forward to following up on the impact that this financing provides,” said Linus Thand, Portfolio Manager at Afa Försakring.
On leveraging experience: “Think of responsAbility as engineers who design and build the bridge between global investors and impactful companies in emerging markets,” said Martin Heimes, Co-Head of Financial Inclusion Debt. “We’ve been pioneers on the ground for nearly two decades, building networks that translate into impressive sourcing capacity for investment opportunities and ultimately, impact and financial returns.”
On mobilizing private capital: Kalle Hellman, Deputy Head of Unit for Guarantees and Catalytic Financing for Development at SIDA, added, “Consumers and investors are contributing to Agenda 2030 by demanding more sustainable production, transparency and reporting on sustainability issues in their corporate governance, or through direct investments in green bonds or sustainability bonds. So, the Swedish Government has tasked SIDA to mobilize private capital for development. So by issuing a guarantee against the risk of loan defaults, the risk for investors is reduced, thereby reducing the uncertainty for them to invest in new markets and environments.”
On innovation: “For the Danske Bank Team," said Patrik Hökfelt, who has been heading and driving this project," it has been a privilege to work on this project, merging responsAbility as one of the world leaders in Impact Investing with SIDA, to create the bond Financing for Healthier Lives - a sound financial investment with an attractive risk-adjusted return. USD 177.5 million is dedicated to making life better for people in the developing world. The commitment from responsAbility and SIDA, as well as the investors Afa Insurance and Alecta, has been amazing and everyone has been working relentlessly to make this transaction happen.”
About impact investing: Impact investments, which include social bonds, are investments that target a measurable positive impact on the environment and society in addition to financial returns. With a focus on impact, impact investing goes much further than sustainable investing, which generally incorporates environmental, social and governance (ESG) criteria into business or investment decisions (sustainable finance). Switzerland is a leader in impact investing, with one-third of all global impact investments managed within its borders. Also, according to the Swiss government, impact investing plays a key role to achieve the UN's 17 Sustainable Development Goals (SDGs) by 2030.
responsAbility is a leading impact asset manager who designs investment products that make the world more sustainable. Since our inception in 2003, we have been investing in growth markets, directing capital where it is scarce, and targeting both measurable positive impact and attractive financial returns. Currently, responsAbility manages USD 3.5 billion in assets invested in over 300 ESG-vetted high-impact companies in 76 countries. The newly launched Social Bond follows a USD 175 million securitization of microfinance loans successfully completed in 2019. Since inception, funds managed by responsAbility have provided over USD 11 billion in debt and equity financing to companies active in the areas of climate finance, financial inclusion, and sustainable food whose business models directly contribute to the United Nations Sustainable Development Goals (SDGs).
responsAbility is headquartered in Zurich, Switzerland, with offices in Bangkok, Lima, Mumbai, Nairobi, Oslo, Paris and Tbilisi. The company's shareholders include its own employees as well as various renowned Swiss and international financial institutions. responsAbility is authorized by the Swiss Financial Market Supervisory Authority FINMA.
Sida is Sweden’s government agency for development cooperation. Through cooperation with civil society, multilateral organisations, public agencies and the private sector we work for sustainable development and help create conditions for people living in poverty and oppression to improve their living conditions.
About Sida's guarantee instrument:
Sida’s guarantee instrument enables mobilisation of additional capital for development and encourages innovative ways of private sector engagement for global poverty reduction.
About Danske Bank: About us (danskebank.com)
Danske Bank is a Nordic bank with strong local roots and bridges to the rest of the world. For 150 years, we have supported Nordic people and businesses in realising their ambitions, helping them to become financially confident and building their lives and businesses on a solid financial foundation, whether they have relatively simple or very complex financing and transaction needs.
Alecta is a Swedish pension fund managing collectively agreed occupational pensions. Since 1917, our mission has been to provide the best possible occupational pensions for our corporate and private customers. We focus on high returns, great customer service and low costs. We manage approximately 900 billion SEK for our owners – 2.6 million private clients, and 35,000 corporate clients.
About Afa Försäkring
Afa Försäkring is an insurance company owned by Sweden’s labour market parties which provides plans for work injury, incapacity due to sickness, and death. More than 4.8 million employees within the Swedish private sector, municipalities and county councils are covered by at least one of our plans. Afa Försäkring is also a major sponsor of research and development in working environment and health. Our total assets under management is SEK 230 billion.
responsAbility, Stacy Fiehler email@example.com +41 44 403 06 86
Alecta, Hannes Hultcrantz Hannes.firstname.lastname@example.org +46 733 10 06 01
Afa Försäkring, Caroline Rylander Caroline.Rylander@afaforsakring.se +46 8-696 42 63
Danske Bank, Carl Stenson Carl.email@example.com +46 (0)767-216395
Sida, Mattias Bengtsson Byström firstname.lastname@example.org +46 8-698 52 52
This information was produced by responsAbility Investments AG together with its partners to the best of its knowledge and belief. However, responsAbility Investments AG provides no guarantee with regards to its content and completeness and does not accept any liability for losses which might arise from making use of this information. The opinions expressed in this information material are those of responsAbility Investments AG at the time of writing and are subject to change at any time without notice. If nothing is indicated to the contrary, all figures are unaudited. This material is provided for information purposes only. It does not constitute an offer or a recommendation to buy or sell financial instruments or services and does not release the recipient from exercising his/her own judgment. It is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law.
Copyright © 2021 responsAbility Investments AG. All rights reserved.