Environmental and social companies are the new hot investments.
People used to relate doing businesses with searching for gains without worrying about society or even destroying the planet. Companies now understand that corporate governance must focus on environmental and social (ESG) goals if they want to make the business go further.
ESG awareness started with consumers’ choices, but now is time for investors to push the market into a better version for our planet.
Thematic bonds are debt instruments that allow investors to finance specific investment themes such as climate change, health, food, or education. To do that, financial companies ask the company that needs the money to accomplish some requirements by contributing to the theme, such as reducing CO2 emissions, investing in R&D, or even making social services, so they can obtain loans from investors. Then the financial company looks for investors to buy those bonds.
Here are some great thematic bonds projects:
A.) Visa´s Green Bonds
Became the first consumer finance company to issue debt to fund environmentally friendly projects in 2020, raising $3.25 billion through green bonds. It will help finance projects like green buildings, renewable energy, sustainable water, and wastewater management, and projects that support sustainable living behaviors.
B.) “Casa para Todos”:
An Ecuador´s project to finance housing for more than 325,000 medium- or low-income families. Those kinds of loans to support social projects are called Social Bonds.
C.) OCBC Gender Bonds:
An Oversea-Chinese Banking Corporation´s issue to finance its Gender Program includes accelerating progress in gender equality. Its value has reached more than IDR 2.75 trillion ($200 million).
The great advantage of thematic bonds is that it encourages companies to support social goals while it boosts their brand. In addition, it is very useful for companies to classify and measure the impact they are getting in social terms from their investments.
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