Over 75% of the issuers in our sample opted for a targeted approach, directing their proceeds to one specific social bond project category (issuers can have multiple initiatives within one social bond project category) rather than spreading the funding across multiple social bond project categories (as per International Capital Markets Association (ICMA) social bond principles).

The targeted approach during this period – over 95% of the social bond or sustainable bond reports we studied were published after 2020 – could be attributed to global events at the time, mainly the COVID-19 pandemic, which resulted in a very specific set of social challenges.

Figure 1: Number of ICMA project categories according to social and sustainability bond reports

A good way of thinking of social impact is through Maslow’s Hierarchy of Needs. Looking at the project categories in the reports, it becomes evident that the social projects can be aligned closely with this hierarchy. For instance, affordable housing initiatives, addressing the pressing need for shelter, represent the base of the hierarchy. Moving up the pyramid, investments in healthcare, ranging from COVID-19 solutions to the development of accessible primary care and community healthcare centres, fulfil the need for safety and well-being.

Here is a summary of the most quoted project categories from our sample:

a) Affordable Housing (32%): Tackling the Housing Crisis
Corporates in our sample allocated 32% of their social and sustainable bonds proceeds towards affordable housing initiatives. The funds were primarily used for lending to housing associations, which serve as providers of affordable housing, or utilised for the development and provision of affordable housing units. This focus highlights both the significant rise in rental prices and housing shortages in many markets as well as the sizeable identifiable capex associated with this project category.

b) Access to Essential Services – Healthcare (20%): Beyond the Pandemic
In total, corporates allocated 20% of proceeds to healthcare. While a portion contributed to COVID-19 solutions (e.g. Philips’ medical devices), a significant portion of the funds were also going towards developing publicly accessible primary care and community healthcare centres/facilities. These investments underscore the importance of enhancing healthcare infrastructure and expanding access to essential services beyond the immediate pandemic response.

c) Access to Essential Services – Community Service Properties (18%): Building Social Infrastructure
18% of the proceeds allocated to this category have been utilised to finance and refinance Community Service Properties that play a vital role in providing access to essential services and delivering distinct social benefits. These properties encompass a range of assets such as hospitals, elderly care homes, primary schools, secondary schools and universities. By financing and refinancing these properties, corporate issuers align with the broader objective of improving access to essential services, such as healthcare and education, which are fundamental pillars of a thriving and inclusive society.

d) Socioeconomic Advancement and Empowerment (16%): Driving Positive Change
16% of the proceeds in our sample have been allocated to social initiatives aimed at addressing socioeconomic disparities and empowering marginalised communities. This could involve providing financial support, training, and resources to individuals or communities to start businesses, create jobs, and stimulate local economies. For instance, the Ford Foundation has committed $420m over five years to tackle gender inequality exacerbated by COVID-19, as well as support racial justice and civil rights organisations addressing systemic inequities and promoting inclusive democracy. This focus on socioeconomic advancement and empowerment signifies a proactive approach by corporate issuers to drive positive change and create a more equitable and inclusive society. However, some investors have expressed concerns that often revolve around the perception that these endeavours might lean more towards charitable projects than activities directly core to corporate functions.

Figure 2: Allocation of social proceeds from social and sustainable bonds

Watch out for our next article on the “human element”

In the third instalment of our series, we will shift our focus to the “human element” – the individuals and communities who stand as the targeted beneficiaries of these impactful social bond projects.

Note: Research was conducted by analysing 26 social and sustainability bond reports from European and US corporates and looking at the allocations of proceeds from social bonds or allocations of proceeds going to social initiatives from sustainable bonds. Only social and sustainable bonds as reported in social and sustainability bond reports are taken into consideration.