SEC targets $85bn global social bonds market

The Securities and Exchange Commission, SEC, has commenced moves to ensure  that Nigeria and Nigerians benefit from the fast growing global social bonds market currently estimated  at $85 billion.

Social bonds are types of debt issues which proceeds are exclusively deployed to finance or refinance projects aimed at addressing or mitigating a specific social issue and/or seek to achieve positive social outcomes for a target population, usually people living below the poverty line.

Consequently, the Commission yesterday proposed new rules that would guide intending issuers of the bonds.

Among other things, the new rules stated that qualifying projects must promote either affordable basic infrastructure, including clean drinking water, sewers, sanitation, transport, and energy among others.

The projects should also promote access to basic services (health, education and vocational training, healthcare), affordable housing, job creation including through the potential effect of small and medium-sized enterprises financing and microfinance as well as food security and socioeconomic advancement and empowerment.

The proposed rules also stated that  eligible projects should also target people living below the poverty line, excluded and/or marginalised populations and/or communities, vulnerable groups, and with disabilities.

Other beneficiaries, according to the rules include migrants and/or displaced persons, undereducated population and underserved population due to lack of access to essential goods and services.

The Commission said: “The volume of social bonds issued in 2020 has increased eight times from a year ago, as interest in ethical investment rises and more governments and agencies see them as a key funding tool for specific projects. “Issuance of social bonds has surged to $85 billion this year so far, compared with $10.6 billion in the same period of 2019.

The popularity of social bonds has increased as the COVID-19 crisis has led investors to place more emphasis on the “social” component of environmental, social and governance-driven (ESG) investing.

“Governments, people and businesses have suffered a serious financial crunch as a result of the COVID-19 Pandemic. In Nigeria, funding of social projects was affected as resources were diverted to unexpected areas of expenditure which ordinarily could have been financed by issuance of social bonds.”