Investor Appetite Does not Yield ‘Social Premium’

Demand for exposure to social bonds, driven by themes including food security, clean water and access to essential services, is outstripping supply, an investor survey conducted by Goldman Sachs Asset Management has found.  Around two thirds of 700 European investors surveyed said they currently allocate to social bonds (29%) or are interested in doing so (36%). But a “perceived shortage” of products offering exposure to social bonds was cited as the biggest impediment to investment, alongside concerns over market diversification. Social bond issuance more than quadrupled in 2020, with the market growing to €464 billion in 2022, dominated by euro-denominated debt, largely issued by the EU and member states in response to the Covid-19 pandemic. Nearly 57% of investors said they sought to benefit under-served populations lacking quality access to essential goods and services through their social bond investments. Affordable basic infrastructure, such as clean water, was the most popular social theme cited by investors (70%), followed by food security and sustainable food systems (63%). Despite evidence of a supply-demand imbalance, the survey said investors do not see social bonds trading at a premium to comparable conventional bonds. “The market is now large and diverse enough to make social bonds a viable complement to investors’ existing fixed income exposure,” said Bram Bos, Global Head of Green, Social and Impact Bonds at Goldman Sachs Asset Management. “The market’s growth potential will make social bonds increasingly attractive to a wider range of investors over time.”

 

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