Fight COVID-19 Social Bond – AFDB FLOATS $3BILLION ON LONDON STOCK EXCHANGE

Fight COVID-19 Social Bond – AFDB FLOATS $3BILLION ON LONDON STOCK EXCHANGE
  • The USD 3 Bn is the AfDB’s largest social bond till date, and also the biggest in the capital markets.
  • The three-year maturity bond, which is available through the Sustainable Bond Market, initially attracted USD 4.6 Bn of interest in the book. 
  • Fight COVID-19 Social Bond  is issued under the AfDB’s Social Bond framework

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Named Fight COVID-19 Social Bond, The over-subscribed transaction, which attracted $4.6 billion of interest in the book and raised an exceptional $3 billion, was launched to alleviate the impact of Covid-19 on Africa’s economies and livelihoods.

The three-year maturity bond, garnered interest from central banks and official institutions, bank treasuries and asset managers including Environment, Social and Governance (ESG) investors.

Several high-quality ESG investors actively supported this remarkable transaction, including Affirmative Investment Management (UK), Breckinridge, Columbia Threadneedle (USA), the Government Pension Investment Fund, the International Fund for Agricultural Development, Pension Boards – United Church of Christ, PineBridge Investments, Praxis Impact Bond Fund, TIAA/Nuveen and the United Nations Development Program.

“The international community must work together to successfully tackle the coronavirus pandemic. The UK, along with partners like the African Development Bank and London Stock Exchange Group, is supporting the most vulnerable countries to invest in their own health systems and avoid economic hardship,” International Development Secretary Anne-Marie Trevelyan said about the listing.

“While we invest in areas like vaccine research to help end the pandemic sooner, this private investment through the AfDB, and our support for emergency lending through the IMF, will also help limit its impact on the global economy,” Trevelyan further noted.

The London Stock Exchange, at the heart of London’s vibrant financial hub, is championing forward-looking initiatives aimed at deepening and diversifying the market. Its dedicated Sustainable Bond Market (SBM) draws innovative issuers and improves access, flexibility and transparency for investors.

Eligible social or sustainability bonds with use of proceeds aligned to mitigating the impact of Covid-19 will be admitted on the exchange with admission fees waived for an initial period of three-months, London Stock Exchange has announced.

Such social and sustainability bonds fund essential services such as healthcare, water and sanitation, supporting employment, or with a link to the relevant UN Sustainable Development Goals.

Nikhil Rathi, CEO, London Stock Exchange plc and Group Director of International Development, said:

“We welcome the first bond from African Development Bank to list on our market and support them in their vital efforts to mitigate the impact of Covid-19 across Africa. This bond highlights the important role that social and sustainability bonds can play in directing funding to those countries, sectors and people across the world heavily impacted by this pandemic.”

The Bank established its Social Bond framework in 2017 and raised the equivalent of $5 billion through issuances denominated in US dollars, Euro and Norwegian krone.

The Bank’s previous activity in the social bond market has seen financing to build hospital capacity, boost access to health and healthcare services, strengthen health systems, provide improved access to water and sanitation, and create jobs across the continent.

Commenting on the listing, Martin Scheck, CEO of The International Capital Market Association or ICMA, said: “We believe Social and Sustainability Bonds can provide an immediately actionable channel for the market to finance projects that directly contribute to alleviating the social and economic impact of the Covid-19 crisis.”

Acting SVP, Swazi Tshabalala and Hassatou N’Sele, Treasurer, African Development Bank Group, gave credence to the monumental social bond.

Swazi Tshabalala, Acting Senior Vice President, African Development Bank Group, said:

“The African Development Bank is at the forefront of helping African countries fight this pandemic with innovative financing solutions. We welcome this partnership with London Stock Exchange which will help us expand the horizon of investors that are interested and committed to Africa’s sustainable development.”

Hassatou N’Sele, Treasurer, African Development Bank Group, said:

“We appreciate the partnership with London Stock Exchange as we strive together to move the African continent forward. Today more than ever, Africa and the world need to stand as one to ride out the Covid-19 crisis.”

How beneficial is AFDB’s Fight COVID-19 Social Bond in Africa?

Being that the London Stock Exchange is the third-largest of its kind in the world, with a market cap of USD 4.6 Tn, it provides AfDB with the needed unparalleled access to institutional investors around the world. 

These investors, would in turn, uncover more price discovery and potentially lower the costs of borrowing for the Bank, its African member countries and the continent’s private sectors. 

As the primary effort to combat the virus crisis, the Bank approved the COVID-19 Rapid Response Facility (CRF) on April 8, 2020, to provide a flexible range of support to member countries. 

The economic effects of coronavirus will be felt in Africa through reduce trade, hampered financial flows and dried up supply chains even as the region risks falling into a recession. The lockdown in advanced economies will reduce tourism and result in a decline for commodity prices. 

All of this, inexorably, further reduces Africa’s capability to respond to the basic needs of the population at this critical time. So providing the bond and executing a dual listing for it could go a long way in helping the continent heal from the effects of the crisis.

 

Bet you Didin't

Did you know that the world’s first-ever social impact bond was issued in 2010 to prevent reoffending in a prison in the United Kingdom?