What is a social bond, social bonds (social bonds , bonds of social influence) are debt securities, the proceeds of which are placed to finance projects with a positive social effect The issuer of social bonds can be a state organization , not a commercial one institution or a private company that issues social bonds to attract funding for social projects. The size of the social bond market for ten years is 843 billion US dollars .
The main difference from traditional debt instruments is this principles of social bonds - guidelines for the use of funds, project selection processes, management of funds, reporting. Social use of funds - involves the use of proceeds from the issuance of bonds to finance projects in such areas as affordable basic housing, affordable infrastructure, affordable education, employment of vulnerable population groups, rehabilitation and reintegration, affordable health care, food security, socio-economic upliftment and employment. Another feature of social bonds is the presence of a social provider.
It is he who plays an important role in the issuance of social bonds , namely, the social provider performs the following functions:
1. Initiates a social project, defines a social need, develops a project concept for its solution and justifies the need to attract financing through social bonds.
2. Implements the project after attracting funds. Becomes the executor of the project, for example, carries out construction, purchase of equipment, hiring of personnel, implementation of new methods and technologies, etc.
3. Service provider. After completion of the preparatory stage, the social provider begins the direct provision of social services - medical rehabilitation, social adaptation, vocational training , etc.
4. Reporting entity. The social provider regularly prepares reports on the use of the funds raised, the progress of the project, social results and impacts for the issuer of social bonds and investors.
When issuing social bonds to finance projects in the field of rehabilitation, the issuer can, as a rule, expect to direct the funds raised to the following main areas:
1. Construction and reconstruction of rehabilitation centers and clinics
2. Equipping rehabilitation equipment and technologies
3. Creating a barrier-free environment in rehabilitation institutions
4. Development and implementation of rehabilitation programs and methods .
5. Creation of complex multidisciplinary rehabilitation programs .
6. Implementation of innovative methods of physical, psychological, and social rehabilitation .
7. Training and development of rehabilitation personnel
8. Expanding the availability of rehabilitation services
9. Creation of a network of rehabilitation centers in different regions
10. Development of mobile and remote rehabilitation services
11. Information campaigns about the importance of rehabilitation
12. Creation of resources and databases on available rehabilitation services
Thus, the issuer of social bonds can finance complex projects for the creation or modernization of rehabilitation infrastructure, improving the quality of services and their availability for different segments of the population.
Why are social bonds interesting for investors?
1. Tax benefits. Some states provide tax incentives for investors who invest in social bonds, including in the field of medical rehabilitation. This makes such investments more profitable.
2. Internal social policy of companies . Many large corporations strive to adhere to ESG (Environmental, Social Responsibility and Governance) principles. Investing in social bonds of rehabilitation programs allows them to implement internal social policies and receive reputational benefits.
3. Projects with state guarantees. If the issuer is the state or an organization with state guarantees, then investments in such social bonds provide reliable and stable guaranteed income, which is attractive to conservative investors.
4. Diversification of the investment portfolio. Adding social bonds to an investment portfolio alongside traditional financial instruments allows you to reduce overall risks and diversify investments.
For many investors, it is important not only to obtain a financial profit, but also the opportunity to make a positive contribution to solving social problems. With the development of the social bond market and the increase in issuance volumes, this sector may become increasingly attractive to investors in terms of potential returns and liquidity of such investments.
Here are some examples of issuing social bonds to finance projects in the field of medical rehabilitation:
, the International Finance Corporation (IFC) issued social bonds worth $285 million for a project to expand access to rehabilitation services in developing countries, including the construction of new centers.
In 2020, the government of Panama issued social bonds worth $1.25 billion, part of which was used to improve infrastructure and equip rehabilitation clinics throughout the country.
The Holmusk Company , a Singapore-based mental health rehabilitation company, raised $15 million in 2021 through a social bond issue to expand its network of centers.
HelpAge International , an international charity, issued a £5m social bond in 2019 to fund rehabilitation programs for older people after injury and illness .
Maitri Foundation Trust in India has raised INR 750 million ($10 million) through social bonds in 2022 to build physical rehabilitation centers for the disabled in rural areas.
Medical Properties Trust , an American REIT in the field of medicine, regularly places social bonds, including in 2023 for $500 million in part for the reconstruction and modernization of rehabilitation facilities.
