Similar to green bonds, social bonds are fixed income securities whose proceeds are earmarked to finance projects with a defined social impact, often targeting vulnerable population groups. These groups may include people living below the poverty line, marginalised populations, people with disabilities, migrants and undereducated persons. Typically, social bonds are issued by agencies, governments, corporates and international groups of states, such as the European Union.
Social bonds give investors the opportunity to improve the social profile of their portfolios and to make a measurable impact by investing in social projects and/or companies. Social projects include themes such as affordable basic infrastructure and housing, food security and sustainable food systems, access to essential services (such as healthcare, financial services, education and training) and socioeconomic advancement and empowerment.
Issuers also have the possibility of issuing a sustainability bond, which is used exclusively to finance a combination of green and social projects.
Nordea helps its clients to issue social bonds and works with clients to develop social bond frameworks, which articulate how the client’s governance and management systems are used to track, manage, and report on the use of proceeds so they are allocated only to eligible social purposes. Social bond frameworks are reviewed by a second opinion provider which provides an independent confirmation that the framework is aligned with the Social Bond Principles.
