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01 Apr 2020

Social and sustainability bonds: a weapon to fight the pandemic?


Social and sustainability bonds are one of the tools that multilateral development banks are already using for alleviating the economic and social impact of the COVID-19 crisis. March was a bumper month, with a USD 1 billion issue by the IFC followed by a record-breaking USD 3 billion issuance by the African Development Bank. In each case, the proceeds were earmarked for tackling the pandemic.

On 31 March, the Executive Committee of the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines, supported by the International Capital Market Association (ICMA), published new guidance and a Q&A dealing with social and sustainability bonds in the context of the COVID-19 crisis: (https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/covid-19-market-updates/covid-19-market-updates-sustainable-finance/).

A quick recap

Social bonds finance projects with positive social outcomes. 

Sustainability bonds finance both green and social projects.

In both cases, best practice is founded on principles promulgated by ICMA (The Social Bond Principles and The Sustainability Bond Guidelines). Evaluation is based on four core components: use of proceeds, project selection process, management of proceeds and reporting.

Why has the guidance been issued?

This publication does not substantially modify previous guidance on social and sustainability bonds. Rather, the intention is to emphasise that, since the outbreak is a social issue that threatens the world’s population both in terms of health and economic welfare, projects to tackle the pandemic will qualify for social/sustainability treatment. Consequently, existing guidance relating to social and sustainability bonds is immediately applicable to efforts addressing the COVID-19 crisis.

Who can issue COVID-19 related social/sustainability bonds?

Any type of issuer, first-time or seasoned, can issue a COVID-19 related social/sustainability bond. So far, as we have seen, issuance has largely been from the global development institutions, but the guidance may encourage others to look at COVID-19 related social/sustainability bonds as a viable product.

What qualifies as a COVID-19 related social/sustainability bond?

Any bond that would otherwise qualify as a social/sustainability bond and where the proceeds are used to mitigate COVID-19 related social issues and bring about a positive social outcome. If only part of the proceeds are designated to fight COVID-19, this should be indicated to the market. Bonds whose proceeds are partially used for tackling COVID-19 and partially for non-social or non-green projects should not be labelled as social or sustainable. The bond may be issued through an issuer’s existing green bond framework provided the criteria are wide and generic enough.

Illustrative examples of qualifying COVID-19 related use of proceeds include:

  • increasing capacity and efficiency in provisioning healthcare services and equipment
  • medical research
  • SME loans that support employment generation in affected small businesses
  • projects specifically designed to prevent and/or alleviate unemployment stemming from the crisis.

Who can benefit?

Although beneficiaries of social/sustainability projects are usually specific groups, in this case, the pandemic nature of COVID-19 means that the general population as whole may be targeted.

Ongoing reporting

ICMA recommends separate impact reporting within an issuer’s annual social or sustainability impact report with appropriate COVID-19 related indicators.


This guidance is a welcome and timely intervention by ICMA in clarifying its position, and will, it is hoped, embolden new and existing issuers to weaponise social/sustainability bonds to fight the pandemic. The challenge, amidst the urgency of action and the lack of visibility as to timing or outcome, will be to ensure that projects are properly identified and bond proceeds suitably employed.