What are social bonds?
Green and social impact investing involves purchasing bonds where the proceeds are earmarked for projects which support a low carbon economy or the basic needs of underserved populations and communities.
Social bonds offer investment solutions where proceeds are directed to projects that seek a broader positive societal impact. Social considerations are at the core of economic development and merit as much attention as climate change – we see the two issues as interdependent. The social projects that lie behind issuance may target an array of objectives, such as social housing, microfinance, financing for small- and medium-sized enterprises, access to education, improvements in gender equality, support for employment in underserved regions and more.
Why consider investing in social bonds?
Investing in social bonds enables investors to address the social dimension of the transition to a low-carbon economy by investing in companies and projects whose products or activities provide positive social impact, with no additional cost compared to conventional debt. Just like green bonds, social bonds are a highly transparent tool, where every project that is funded can be tracked and impact quantified and measured.
While most impact strategies currently focus on the environment and decarbonization, we believe the tremendous growth observed in the social bond market over recent years presents a compelling investment opportunity. The social bond market could be considered to now be in the nascent stage the green bond market was in a few years ago, with similar growth potential.
Our social bonds strategy
AXA IM dedicated Social Bonds strategy leverages our global fixed income process and proprietary sustainable bond framework to build a diversified portfolio that invests at least 75% in social and sustainability bonds (sustainability bonds aim at financing both environmental and social projects), with up to 25% invested in rigorously selected conventional bonds aligned with a positive social impact to improve diversification, liquidity and enhance the yield profile.
We focus on bonds which provide benefits in one of three key social themes:
- Health & Safety
As there is no real consensus yet on what is a ‘true’ green bond and what is not, AXA IM has developed a proprietary green bond assessment framework. We built on this to create new frameworks for social and sustainability bonds.
Our social and sustainability bonds framework
Using AXA IM’s social and sustainability bonds framework, we only invest in Social Bonds projects which provide a material benefit to society to ensure that only the most relevant and impactful projects receive the necessary financing. Our proprietary framework is composed of four pillars for choosing an investment:
- Does the bond fit with the bond issuer’s social objectives?
- Will the project have a clear impact beyond the issuer’s business as usual?
- Do we know that the proceeds will finance what they are supposed to?
- How does the issuer plan to track the progress of the project and measure impact?
How we measure impact
We aim to provide transparent and measurable impact metrics focused on UN Sustainable Development Goals contribution towards environmental and societal issues, including:
- SDG 1: No Poverty
- SDG 3: Good Heath & Wellbeing
- SDG 8: Decent Work & Economic Growth
- SDG 11: Sustainable Cities and Communities
The targeting of specific SDGs does not imply the endorsement of the United Nations of AXA Investment Managers, its products or services, or of its planned activities and does not constitute, explicitly or implicitly, a recommendation for an investment strategy.
Our ACT range is designed to enable our clients to invest in the companies and projects leading the transition to a more sustainable world. These strategies go beyond ESG integration, either following a process in which investment decisions are driven by ESG themes or seeking out intentional, positive, measurable and sustainable impact.
There is an economic and human cost to biodiversity loss which is being addressed through products and services contributing to ecosystem preservation and biodiversity mitigation.
Investment in fixed income involves risks including the loss of capital and some specific risks such as counterparty risk, geopolitical risk, liquidity risk, credit risk and currency risk.