Farnam Bidgoli, Head of Sustainable Bonds, DCM EMEA, and Luying Gan, Head of Sustainable Bonds, DCM Asia-Pacific, explain how HSBC’s leading ESG capabilities are supporting clients to respond to the COVID-19 outbreak and helping sections of the economy that are hardest hit by its effects.
Social bonds may be the youngest member of the sustainable bonds family but, amid the outbreak of COVID-19, they are becoming increasingly appealing for both issuers and investors.
Issuance has surged as borrowers raise funds to help governments, businesses and companies weather the effects of the global pandemic. Social bonds allow investors to make an impact in addition to a financial return.
Social bonds first emerged in 2015 with HSBC acting as one of the co-writers of the International Capital Market Association’s guidance for the instrument. However, they are still a relatively unknown entity for some clients. HSBC’s leadership in this area as the leading underwriter for all green, social and sustainability (GSS) bonds plays a pivotal role in the current environment helping issuers leverage the capital markets to secure funding and liquidity and promptly respond to their COVID-19 needs.
One such example is the Nordic Investment Bank which announced a EUR1 billion three-year response bond, raising capital to finance projects to alleviate the effects of the pandemic and support the recovery process across the Nordic regions.
Our quick turnaround, geographical reach and ability to connect issuers with prominent impact investors have positioned HSBC at the forefront of current activity. We have acted as a lead on seven social/ sustainability bonds in the past eight weeks with USD9.4 billion capital raised to support COVID-19 response pledges**, such as reinforcing medical provisions, loans to companies forced to close their doors and projects designed to counteract the social and economic consequences of the virus.
Other trades of note include:
- HSBC led a USD4.25 billion three-year Global Sustainable Development Bond for the Inter-American Development Bank following its announcement that it has up to USD12 billion in resources that can be programmed to countries requesting support for disease monitoring, testing and public health services.
- HSBC acted as joint lead manager for the World Bank’s three-year GBP global benchmark, raising GBP1.5 billion from more than 60 investors around the world.
- HSBC worked on a EUR1 billion seven-year social inclusion bond sale by the Council of Europe Development Bank which was more than four times over-subscribed.
- HSBC was joint lead manager and joint lead bookrunner on a HKD4 billion social bond from Bank of China Macau Branch (BOC Macau). With banks and governments looking to help businesses facing economic fallout from the COVID-19 outbreak, BOC Macau issued the bond with proceeds earmarked for lending to small Macanese firms hit by a sharp drop in tourism. This was the first social bond from a Chinese issuer in the international markets and highlights increasing issuance and appetite for social bonds in Asia.
- HSBC helped Korean bank Shinhan Bank issue a USD50 million COVID prevention bond in the private market, with proceeds used to alleviate the impact on smaller firms. * HSBC acted as a joint bookrunner on Kookmin Bank’s sustainability bond transaction. This again demonstrates the strong investor receptivity for Asian credits following recent market volatility, as well as interest in the COVID-19 alleviation format, particularly where it satisfies social bond eligibility criteria
*According to data from Environmental Finance Bond Database
** As of 21 April, 2020