MANILA – The Securities and Exchange Commission (SEC) has put forward the issuance of social bonds to support efforts to contain the coronavirus disease 2019 (Covid-19) pandemic, manage the resulting socioeconomic impacts and build resilience to future shocks.
In a statement Tuesday, the Commission cited the potential of the social bond market as a funding source for Covid-19-focused projects, as it approved the country’s first issuance in accordance with the Asean Social Bond Standards (SBS).
Social bonds are financing instruments whose proceeds are exclusively used to finance or refinance new or existing projects that directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes.
“Covid-19 has given rise to serious socioeconomic issues globally, pushing enterprises to the brink of failure and leaving millions of people jobless,” SEC chairperson Emilio Aquino said.
“The social bond market could boost our response to and recovery from the pandemic by unlocking the much-needed capital for the promotion of public health, reopening of businesses and preservation of jobs, among others.”
On June 17, the SEC approved the application of Bank of the Philippine Islands (BPI) to use the Asean Social Bond label for its COVID Action Response (CARE) Bonds.
BPI looks to raise at least PHP3 billion from the ongoing offering to finance and refinance eligible micro, small and medium enterprises (MSMEs).
The CARE Bonds, which represents the third tranche of the bank’s PHP100 billion bond program, will have a tenor of 1.75 years and an interest rate of 3.05 percent per annum.
Covid-19 social bonds
At the height of the Covid-19 pandemic, the International Capital Market Association (ICMA) released guidance on the usability of social bonds in financing projects aimed at addressing or mitigating social issues wholly or partially emanating from the coronavirus outbreak.
ICMA confirmed social bonds may finance Covid-19-focused social projects such as those seeking to increase capacity and efficiency in provisioning healthcare services and equipment, and those supporting medical research.
Issuers may also issue social bonds to provide SME loans that support employment generation in affected small businesses, and advance projects specifically designed to prevent or alleviate unemployment stemming from the pandemic.
While they seek to achieve positive social outcomes for target populations, social bonds may likewise finance projects that address the needs of the general population, given the far-reaching impact of the Covid-19 pandemic and any resulting socioeconomic crisis, according to ICMA.
The International Finance Corporation, a member of the World Bank Group, likewise provided illustrative case studies on how issuers from various industries may use social bonds to raise financing toward addressing social issues brought about by the Covid-19 pandemic.
In the pharmaceutical industry, for instance, social bonds may finance research and development of Covid-19 tests, vaccines and/or other medications intended to alleviate symptoms of the coronavirus.
Financial institutions, meanwhile, may use proceeds from social bond issuances to provide loans to small businesses negatively impacted by the economic slowdown prompted by the Covid-19 pandemic.
Manufacturing companies may likewise issue social bonds to finance the manufacturing or modification of existing machines to produce health safety equipment and hygiene supplies.
“We hope more companies will explore the social bond market to pursue socially relevant and impactful projects, especially in this time of unprecedented global health and economic crisis,” Aquino added. (PR)
