NN IP is adding a social bond to its impact bond offering.
To be known as the NN (L) Social Bond fund, it aims to achieve positive social impact alongside an attractive financial return, the firm said. It added that the proceeds are to be “used for predefined projects with clear social benefits to a specific target population”.
No further details were provided at this stage.
Bram Bos, lead portfolio manager green, social and impact bonds at NN IP, said: “We are delighted to maintain our momentum in impact investing whilst simultaneously playing a role in financing initiatives that will aid social development. Social bond issuance picked up in 2020 and 2021, especially in financing social projects that focus on dealing with the long-term effects of the pandemic.”
He added: “During this time, the social bond market caught up with other impact bonds and now has a capitalisation of more than €400bn, offering investment opportunities for a well-diversified social bond portfolio. In 2022, we expect an issuance of €250bn. Our outlook for growth opportunities is positive and we are looking forward to tapping into the social bond market and working towards a better future.”
NN IP said the fund primarily invests in global social bonds and money market instruments of high quality (AAA to BBB-), that are denominated in euros. But it can also include sustainability bonds that allocate at least half of the proceeds to social projects. Specifically, the fund is focused on investments in social bonds and sustainability bonds that allocate proceeds of social projects that promote affordable basic infrastructure such as water and sanitation, access to essential services in education and health, affordable housing, employment, food security, and socioeconomic advancement and empowerment.
The new NN (L) Social Bond is a sub-fund of NN (L) established in Luxembourg. NN (L) is authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. Selected share classes of the sub-fund are currently registered in Luxembourg, Belgium, Germany, France, Italy, Austria, Denmark, Finland and Norway.
As reported on these pages in December, Bos said there is clear evidence which indicated the appetite for social bonds was far from waning.
Back then, he said: “In 2021 year to date, we have seen issuance in social bonds of $224bn. The trend is continuing, and we expect ongoing growth in the social bond market in the years ahead.”
At the time, Bos said he expected to see more focus on social issues and social bonds through the EU’s social taxonomy. However, he added that it will be years before it reached the same level as the EU green taxonomy.