A pandemic-induced acceleration for impact investing – and why Communications is crucial
By Ellie Hyman, Account Manager
Since its proliferation, COVID-19 has served to expand and exacerbate existing gaps within society, from healthcare and housing, to education, to technology. In Ethiopia and Nigeria, for example, the richest 20% of households were much more likely to have children engaging in any learning activity after school closures than the bottom 20%, according to the World Bank.
Consequently, the call for social justice is being amplified, and responsible investing is on the rise. In this blog, we consider: how has COVID-19 helped to shape the landscape of impact investing, and – fraught with hurdles, obstacles, and acronyms – how can an effective communications strategy help to navigate this world?
An unlikely weapon: capital market response
Since the start of the pandemic, interest in social justice issues among investors, as well as companies and governments issuing debt, has recently exploded. According to the Climate Bonds Initiative, of the $400 billion in sustainable debt issuance in 2019, social bonds made up about 5% ($20 billion).
But social bonds are on the rise. In April 2020, $32 billion of “social” and “sustainability” bonds were issued, according to Morgan Stanley – the first month in which social and sustainability bond issuance surpassed green bonds. And in October 2020, the EU issued a €17 billion social bond, the second largest ever issued, to fund the union’s job support programme. The issuance was more than 13 times oversubscribed by investors, the EU said, indicating significant demand for socially-minded investments. It is clear that, while historically, significant weight was placed on the “E” factors in ESG, with “S” and “G” factors somewhat ignored, corporations and investors alike are beginning to broaden the scope of their consideration ESG, realising that this is the only way to facilitate a truly just transition.
Effective comms is key
As this surge plays out, concerns around “social-washing” – the social and sustainable debt equivalent of “greenwashing”, whereby an issuer may misrepresent the social impact of the projects being financed by such investments – are growing.
So what is the most effective way for players across the entire financial community to best understand the ABCs of ESG and avoid the proliferation of such misinformation?
In addition to guiding regulations by organisations like the LMA and ICMA, which will help to ensure transparency and standardisation among social and sustainability bond issuance, effective, accurate communication when it comes to ESG investing can be beneficial for all players.
For companies looking to issue this type of loan, clarity and transparency around the use of proceeds, reporting, additionality and governance will help secure subscription and mitigate against accusations of green- or social-washing.
And for asset managers and impact investors looking to expand their portfolios, an effective PR and communications strategy is equally useful. Not only can it provide internal clarity and messaging so everyone is singing from the same hymn sheet, but it can help improve legitimacy and establish a discourse that can attract new partners and clients.