The first ever sovereign SDG bond is expected to be issued later this year, RI has learnt. The transaction will be part of new efforts by the UN to create a market for ‘Women’s Bonds’ – aimed at advancing the fifth Sustainable Development Goal for global gender equality by 2030.
The issuer of the debut deal is not clear, but RI understands that the initiative has identified several sovereign issuers interested in issuing such SDG bonds, which will initially focus on ending female genital mutilation (FGM) and child marriage across Africa.
The bonds are expected to address SDG 5 primarily through the inclusion of a covenant, linking the coupon a substantial decrease in FGM and child marriage by a certain date, rather than through a convention use-of-proceeds approach – although some could also include ringfencing of proceeds for the same goals.
While each deal will be bespoke, it is expected that several will include guarantees from development banks or other highly-rated public entities, and some will combine other focus SDGs into the deal.
Announced last week, the efforts are part of a wider initiative focused on the SDG5, being led by Chris McGarry, a partner at law firm White & Case – a “Knowledge Partner” to the G20 Sustainable Finance Study Group. Back in 2018, McGarry co-authored a G20 report hailing CLO bonds as a “key tool” in climate finance back, alongside the likes of former AP4 bond trader Ulf Erlandsson and Nicholas Pfaff of the International Capital Market Association (ICMA).
The United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) and the Global Media Campaign Charity to End FGM (GMC) are also participating in the initiative. UN Women will be responsible for monitoring sovereign progress towards the targets, and will work on the ground with the Global Media Campaign Charity to End FGM (GMC) to identify not-for-profits that can help deliver progress.
Maggie O’Kane, Executive Director of the Global Media Campaign to End FGM, said: “In the same way that green bonds have now helped raise more than $1trn to tackle climate change, the Women’s Bonds initiative could accelerate the end of FGM and child marriage across Africa. The potential is mind-blowing, and if we can get it right it will be life-changing for millions of women.”
The initiative could also see the creation of a global Women’s SDG fund, which would invest in countries and companies that have entered into “measurable gender equality commitments”.
Last year, McGarry and other White & Case colleagues advocated the Sovereign SDG Bond and the SDG CLO as products that could connect the bond market to the SDGs.
The UN estimates that achieving the SDGs will require up to $5trn of additional investment in developing countries each year. White & Case wrote that the $100trn bond market is the “only pool of capital deep enough to deliver the SDGs by 2030”.