We have all become familiar with the label ESG (Environmental, Social, Governance) and in particular we have a good understanding of ‘Environmental’ and maybe even ‘Governance’ but ‘Social’ is perhaps more difficult for the layman to understand:
It does seem like some of the ‘social’ could fit into ‘governance’ particularly areas such as diversity in the workforce but I don’t think it matters too much, as long as these issues are in, and being addressed by fund managers, when considering an investment.
Trinity investment portfolios will not just include equity investments but also investment in debt. This is sometimes called Bond investing or Fixed Interest investing. Instead of raising capital through equity, a government or corporation raises money through debt and this is then traded much like equities.
Typically, within the ESG Bond market, it has been the environment which has been dominant. Green Bonds are loans which are used solely for specific pre identified environmental purposes. However, in the advent of Covid 19, there has been a shift towards Social bonds where the proceeds will support products and services contributing to health conditions and maintaining living standards for communities impacted by the Covid-19 virus.
In the past 3 weeks more than $9bn of debt has been issued to tackle Covid 19 and this has been raised by Supranationals such as European Investment Bank and the African Development Bank. There is a definite appetite for these types of bonds which will make a difference in the lives of so many.
A good example is the Nordic investment Banks ‘Covid 19 response Bond’ whose remit is ‘to provide loans which will support the provision of products and services contributing to health conditions and maintaining living standard for groups challenged by Covid-19. More specifically, they will target the financing of impacted small and medium-sized enterprises and the financing of large companies in the medical equipment and healthcare sector facing increased demand for equipment or services.’
Perhaps it is only a matter of time before we will see Governments issuing Social Bonds?
There are plenty of collective investments (OEICS, Unit Trusts, Investment trusts) which have a Social impact remit, and the risk is spread though holding a basket of underlying investments within the fund which you (or your pension fund) own a piece of.
The ESG Bond market, and in particular the Social Bond market is moving at a pace. It is a classic opportunity to see our investments be a force for good, and Trinity are delighted to have measurable model portfolio Social impact solutions for our clients. Would you like your investments to be making a positive impact?