Lauren Kashmanian on social bonds

Green bonds, which are bond issues with an underlying environmental or sustainable purpose, have been issued in the municipal bond market since 2013, when Massachusetts issued the first green-labeled municipal bond. Social bonds, which are newer to the municipal bond market, are defined as “bonds with a use of proceeds for new and existing projects with positive social outcomes.” Some of the issue types within the municipal market that are eligible for this label include bonds for affordable basic infrastructure, such as clean drinking water, clean transportation, and clean energy projects; bonds for essential service access, such as health care and education; bonds for socioeconomic advancement and empowerment; and bonds for affordable housing projects. 

Social bonds have also allowed nonprofit foundations to access the public bond market and continue their philanthropic work during a time when charitable donations from corporations and individuals might be less reliable. The Ford Foundation issued the first social bond by a nonprofit foundation earlier this year, and the issue was designated as such by Sustainalytics, a second-party verifier, under the category of socioeconomic advancement and empowerment. The net proceeds will be used toward “building resilience in the nonprofit sector and stabilizing and strengthening key nonprofit organizations essential to reducing inequality, so that they are in a position to advance just, inclusive, and equitable recovery efforts following the COVID-19 pandemic.”

~  Lauren Kashmanian, Senior Portfolio Manager, Parametric, "Muni Investors Can Prioritize the 'S' in ESG with Social Bonds: Municipal bond investors have a new way to support positive social change.," WealthManagement.com, March 10, 2021