INVESTING IN INCLUSIVE GROWTH Social Bond Market Insights for Investors

As the transformation of the global economy gathers pace, investors increasingly recognize that the goal of sustainable growth is unattainable unless it leads to a more inclusive, equitable society. For years, investments guided by environmental, social and governance (ESG) criteria focused primarily on the “E.” That is changing. With inflationary pressures and sluggish economic growth disproportionately affecting lower-income communities, the “S” in ESG is gaining more attention—and investment.

Until recently, fixed income investors looking for opportunities created by the drive toward inclusive growth had few compelling options. Thanks to the rapid rise of social bonds, they now have a viable alternative to conventional bonds that allows them to channel capital into socially beneficial projects such as expanding affordable healthcare and reducing income inequality. Once a niche product, social bonds are entering the investing mainstream.

The goal of any fixed income investment is to maximize risk-adjusted returns, and social bond allocations are no different. Selecting an asset manager with a strong fundamental research process, detailed reporting and robust risk management is crucial, and can help investors achieve their social and financial goals while seeking to limit downside risk and uncover the opportunities with the most attractive potential returns.