Social Bonds
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
- Empowerment
- Inclusion
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.
Risks
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.
Clean Economy
Innovative companies are creating solutions to address pressures on scarce natural resources and the need for greenhouse gas emission reduction.
Green bonds
Green bonds are among the most interesting innovations of the last decade in the field of socially responsible investment products.
Biodiversity
New nature-related policies and regulation being developed should drive new investment opportunities as corporates commit to biodiversity positive business models.
US high yield low carbon
We believe the global economy has entered a ‘decade of transition’ towards a more sustainable, de-carbonised model.
Social progress
Invest in the companies providing strong social utility by making essential products and services better quality, more affordable and more accessible to all.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
All investment involves risk , including the loss of capital. The value of investments .and the income from them can fluctuate and investors may not get back the amount originally invested.