Social bond issuance to reach R4bn in South Africa within year – RMB

21st April 2021 By: Donna Slater - Features Deputy Editor and Chief Photographer

The market for bonds issued to meet environmental and social outcomes is expected to grow exponentially in South Africa within the next year, with social bonds expected to feature prominently as the country looks to “build back better” post-Covid-19, states Rand Merchant Bank (RMB).  

RMB sustainable finance and environmental, social and corporate governance (ESG) advisory head Nigel Beck explains that social bonds raise capital for positive social outcomes such as job creation, healthcare, education, gender equality and affordable housing, ensuring better ESG alignment.

The bank is a key partner with government in helping to finance South Africa’s infrastructure goals and has been a funder of infrastructure projects in excess of R100-billion since the inception of public-private partnerships in South Africa. 

“We have already seen the inaugural, JSE-listed social bond issuance in South Africa, the proceeds of which will be directed towards inner-city refurbishment of affordable housing projects.”

He adds that further issuance could prove a “much-needed, post-pandemic boom” for South Africa given the country’s deep need for social services upliftment, while further paving the way for partnerships between the public and private sectors. 

“We have seen these partnerships start to work effectively with infrastructure development and we are optimistic it will also be a good model for social spending.”

As such, Beck suggests that R4-billion is expected in social bond issuance in South Africa within the next 12 months, with that amount having the potential to grow each year over the next three years at least, perhaps longer.

“Issuers are definitely getting better at understanding social bond instruments and how they can be tailored to their specific businesses to align their strategies around ESG,” he says.

This enables them to access the debt capital markets with social bonds that also attract additional investors, which helps achieve tighter pricing through accessing a greater pool of capital.

The adoption of social bonds is a global phenomenon – in 2020, with the Covid-19 crisis exacerbating societal challenges, worldwide social bonds issuances rose sevenfold to $147.7-billion, according to RMB.

And while South Africa is leading the way in Africa, according to Beck, he adds that it can be expected that wide adoption across Africa is experienced as government and companies respond to a deep need for social advancement and delivering on ESG mandates.