AP2, Threadneedle, TIAA-CREF etc. pile into new $500m social bond from development bank IDB

Investors back Inter-American Development Bank’s AAA-rated ‘EYE’ bond

Swedish state pension fund Andra AP-fonden (AP2), US financial services giant TIAACREF and fund firm Threadneedle Investment Management are among a group of 24 institutional investors that have backed an AAA-rated $500m social bond tackling youth poverty issued by the Inter-American Development Bank (IDB).

The bond, called the Education, Youth, and Employment (EYE) bond, will fund IDB loans for projects in Latin America and the Caribbean aimed at improving the quality of children’s education and helping young people enter the job market.

Simon Bond, manager of the Threadneedle UK Social Bond Fund, which has backed the issue, said: “It extends the principles behind supranational green bonds from ethical into the social area, targeting the ‘S’ in ESG investing. We hope to see further issuance with specific use of proceeds addressing social outcomes in this way.”

Citi and Daiwa led the development of the bond. Takashi Hibino, president of Daiwa dubbed the new product “the next stage in the evolution of the ESG capital markets”. The EYE bond will mature in 2018 and yield 1.59%.

It comes as the ‘ESG’ bond market has been growing strongly recently – evidenced by the World Bank issuing a $250m 2-year green bond yesterday (September 17)which was bought by the California State Treasurer’s Office, and a 10-year €50m green bond linked to the performance of the Ethical Europe Equity Index, bought by BNP Paribas Cardif, earlier this year.

And recent investment activity suggests social bonds are gaining traction. Last week, the UK’s Great Manchester Pension Fund and Merseyside Pension Fund were announced as investors in the £35m (€31.4m) Bridges Social Impact Bond Fund. IDB announcement.

EYE bond investors:

Bank of Korea
Breckinridge Capital Advisors
Chugoku Bank
Mirabaud & Cie
Nikko Asset Management Europe
Nordea Funds
Praxis Intermediate Income Fund
Taiyo Life
Threadneedle UK Social Bond Fund
TIAACREF Asset Management
United Nations Development Programme
Zurich Insurance Group