What are being termed ‘socially responsible investors’ were among the buyers of the African Development Bank’s $3bn “Fight COVID-19” social bond last week. The three-year issue aims to help to alleviate the economic and social impact the pandemic will have on Africa. The AfDB said the bond “garnered interest from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6bn”. It’s the largest dollar denominated social bond ever launched in international capital markets to date, the bank said. It will pay an interest rate of 0.75%.
Canadian pension investor Caisse de dépôt et placement du Québec (CDPQ) could be impacted if circus group Cirque du Soleil, in which it has a 20% stake, files for bankruptcy, according to a Reuters report. The Québec-based troupe has laid off almost all its 4,900 staff, the report added.
“Grounding ethics and values” should perhaps guide investor responses to the crisis, according to the International Corporate Governance Network (ICGN), the body which represents investors with a total of $34trn under management. The ICGN said: “It is here where a long-term perspective, and perhaps a grounding ethics and values more generally, should also guide investor responses.” An important guiding principle for investors was investors’ “fundamental fiduciary duty of care to their beneficiaries” – though investors should also “demonstrate support” for companies facing potentially acute financial threats and market pressures along with a sense of “enlightened self-interest”. The note includes a 10-point checklist of questions for investors engaging with companies.
The 2° Investing Initiative think tank is launching a Covid-19 scenario dashboard, designed to help financial institutions and supervisors understand the range of scenario outcomes across key indicators that are currently being modeled in the market. The dashboard will be updated on periodically as new scenarios and information comes in. The dashboard will focus on GDP, share prices, and corporate default scenarios, with potential expansion to other indicators over time. There is a 2DII webinar today on Covid-19 stress-test scenarios, featuring research from S&P.
“We have drastically learned the notion of ‘externalities’,” says fund manager J. Safra Sarasin. The crisis has shown that the contribution of each single individual is required in a crisis, it said in a note on the outbreak. “Until then, some people still believed that throwing one more party or throwing one plastic bag into the Ocean would not really matter. Now we have drastically learned the notion of “externalities,” i.e. the “consequence of an individuals’ activity, which impacts other parties without this being reflected in market prices”.
The World Federation Of Exchanges industry group has criticised recent bans on short-selling for being “damaging to markets and failing to achieve their desired effect”. “Banning short-selling interferes with price formation, thereby increasing uncertainty. That can only artificially amplify volatility and probability of default, the opposite effect to that claimed, and hampers the ability of markets to serve the real economy,” said CEO Nandini Sukumar. Unlike circuit breakers, short-selling bans inhibit orderly markets rather than promote them, the WFE said.
The New York Fed has looked at the lessons to be learnt from the deadly 1918 flu and found that pandemic and made two main findings. First is that areas that were more severely affected by the 1918 outbreak “saw a sharp and persistent decline in real economic activity”. Second, cities that implemented early and extensive non-pharmaceutical interventions (NPIs) suffered no adverse economic effects over the medium term. The findings are in the bank’s Liberty Street Economics blog.
The Pensions Administration Standards Association (PASA), the independent UK body, has announced new guidance to support administrators during the crisis. It says administrators “must concentrate on continuing to pay promised benefits” but admits that there “will be slippage, no matter the scale of the administrator”.
The European Council has adopted two legislative acts to quickly release funding from the EU budget for tackling the crisis. One of the acts amends the rules of the structural and investment funds, while the other extends the scope of the EU Solidarity Fund. The Coronavirus Response Investment Initiative will give member states access to €37bn of cohesion money to strengthen healthcare systems, as well as support small and medium-sized enterprises, short-term working schemes, and community-based services.