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CalSTRS among investors in new $500m benchmark social bond from IFC

California giant joined by Calvert, Affirmative IM, Praxis and QBE among others

The California State Teachers’ Retirement System (CalSTRS) is among a group of leading investors that have bought in to a $500m global benchmark social bond from World Bank member IFC.

It launches a Social Bond Program to expand financing for projects that benefit women-owned enterprises and low-income communities in emerging markets.

Alongside CalSTRS were Affirmative Investment Management, Calvert Research and Management, the International Fund for Agricultural Development, the Praxis Impact Bond Fund, QBE Group, and the United Nations Development Programme. Twenty percent of the investors were first-time investors in IFC bonds.

The three-year bond was 1.4 times oversubscribed and was bought by more than 40 institutional investors – including central banks, official institutions, pension funds, and fund managers.

The bond is listed on the London Stock Exchange and the underwriters were Citi, Credit Agricole CIB and JP Morgan.

The launch shows the momentum behind sustainability bonds. Earlier this month the World Bank itself issued a bond linked to the Sustainable Development Goals. And BlackRock, the giant asset manager, has just unveiled a green bond fund.

“The size of the issuance helps deepen the market for a new but rapidly growing category of sustainability bonds,” the IFC said will use the proceeds to finance projects that help improve social outcomes—specifically by providing finance to companies that buy from smallholder farmers, provide utilities for low-income households, offer affordable health services, education, or housing to low-income people. The funds will also be used to support financial institutions that lend to women-owned enterprises.

“The size of the issuance helps deepen the market”

Affirmative IM’s co-founder Stuart Kinnersley said the new issue “broadens the universe of mainstream bonds that generate meaningful positive social impacts, while fulfilling the strict criteria required under our internal verification processes.”

Gary Brader, Group Chief Investment Officer for QBE, the Australian insurance group, said: “It is an excellent example of the blending of a very high-quality issuer, an appropriate return to the investor, and the overlay of additional social objectives being pursued.” It fits in with its ‘Premiums4Good’ initiative, where customer premiums are put into assets which are socially or environmentally beneficial.

In line with the Social Bond Guidelines
from the International Capital Market Association (ICMA), the IFC Social Bond program is augmented by an annual impact report providing investors with detailed information on the underlying projects supported by the bonds.