With issuances having tripled, year-on-year, Amundi is the latest asset manager to join the fast-growing social bond trend.
The French firm said its strategy will be “among the very few available on the market offering a high allocation to social bonds – minimum 75% of the assets – and a global investment scope”.
Start of a trajectory
A large part of the issuance volume comes from pandemic-related issuances, with issuers embracing the social bond format as a useful vehicle to meet their financing needs, Amundi stated.
As a notable example, on 20 October, the EU issued €17bn in social bonds to help finance member states’ programmes on employment support in the midst of the ongoing covid-19 pandemic.
The asset manager believes this is the beginning of the market’s trajectory, following in the footsteps of the green bond market.
In this context, Amundi said it is committed to supporting the development of this new segment of sustainable fixed income, having supported the expansion of green bonds in emerging markets and beyond pure investment grade instruments.
“Social bonds seek to offer investors a first step in integrating the social pillar of ESG into their investment practices,” the asset manager said.
“They are not only an effective mechanism for financing social projects, but we believe that they also provide investors with the best platform to engage with issuers to increase their activities in socially impactful products and services.”
Managed by Amundi’s alpha fixed income team, the strategy will mostly be invested in social bonds aligned with the International Capital Markets Association’s Social Bond Principles (SBP) whose proceeds will be used for projects compliant with the SBP Project Categories.
Additionally, the company will look to expand the investment universe by including regular bonds issued by sovereigns and corporates selected for their strong social practices.
The portfolio may also include innovative instruments, such as sustainability-linked bonds with social targets.
Rigorous screening and analysis of social bonds will seek to ensure quality at both issuer and issuance levels.
Most social bond issuers are currently sovereign, supranational and agencies (SSAs), mirroring the early days of the green bond market.
With its global investment universe, the solution also aims to benefit from the trend of the social bond market diversifying away from the current European concentration.
Isabelle Vic-Philippe, head of Euro aggregate, will be the lead portfolio manager for the strategy.
She will be joined by co-portfolio manager Alban de Faÿ, head of fixed income socially responsible investing (SRI) process; and Dany da Fonseca, fixed income Euro investment grade (IG) Credit.
The portfolio management team will be supported by Amundi’s 23 strong team of ESG experts.
Commenting on the launch, Eric Brard, head of fixed income at Amundi, said: “In the context of the current economic and health crisis, we believe that investors are increasingly looking for innovative solutions that can generate positive outcomes for society as a whole.
“As the fastest-growing segment of the sustainable fixed income market in 2020, social bonds are emerging as an appropriate financial instrument seeking to capture opportunities of financing projects with a social agenda without giving up on returns.”