COVID-19: How a new breed of bonds can help finance the fight
The battle against the COVID-19 pandemic will incur a huge cost to the global economy. We anticipate healthcare systems, governments, financial institutions and companies will need hundreds of billions dollars to cope with and recover from the crisis. According to the International Monetary Fund: “the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9tn, greater than the economies of Japan and Germany, combined.”
Institutional investors have an important role in the recovery by ensuring availability of and access to financing through capital markets. The challenge in this fast-moving crisis is to ensure that capital can flow where and when it is most needed.
One response to this challenge has been the emergence of COVID-19 bonds. We see the nascent COVID-19 bonds market as a new area for impactful debt issuance, with similarities to green and social bonds. We believe these bonds can help to address the current and future societal challenges of the pandemic.
AXA IM have already invested approximately €230m2 in COVID-19 bonds to support the fight against the pandemic. We have developed an investment framework which expects transparency from issuers around how proceeds will be used to support their response to the pandemic. We also call for a commitment to outcome and impact measurement. In our view, these bonds could also act to boost the growth of social and sustainability bond issuances.