"Social bonds" - new ways of issuing bonds

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The manager of the Columbia Threadneedle Social Bond Manager, Simon Bond, is quoted as saying that the coronavirus pandemic is actually something of an accelerator for social bonds. At the end of March, for example, the Free State of Bavaria placed a record volume of three billion euros as reconstruction aid for Bavarian companies. Various other development banks and the European Investment Bank (EIB) also issued securities worth billions.

The basic idea for such social bonds has been around for some time. They are characterized by the fact that the proceeds may only flow into pre-defined projects and that the issuer must also provide evidence of this use. Columbia Threadneedle's social bond fund is based on the United Nations' 169 sustainability targets. The manager examines how ESG criteria - i.e. ecological and social issues as well as aspects of good corporate governance - are taken into account. As a rule, Columbia Threadneedle avoids companies that are involved in controversies about environmental pollution because climate change has a negative social impact.

Columbia Threadneedle launched the "Threadneedle (Lux) European Social Bond Fund" (ISIN: LU1589836722), which focuses on European social bonds, back in 2017. It invests in around 200 bonds that achieve the highest social score in Threadneedle's research process. When buying bonds, Simon Bond concentrates primarily on new issues because he sees a valuation advantage there. The average coupon is 1.5 percent and the fund's yield to maturity is 1.24 percent. The average credit rating of the portfolio is in the single A range.

Sustainability is also a topic that Family Office Management elective as part of our Master's program in Finance the Allensbach University is playing an increasingly important role. Many families are now basing their investment decisions on ESG criteria and the United Nations Sustainable Development Goals (SDGs). The topic is also referred to as "impact investing".

More information: www.columbiathreadneedle.de