Coronabonds made in Africa

No time for fiscal distancing

Coronabonds are proving unpopular in Europe, dismissed by European Commission President Ursula von der Leyen as ‘just a slogan’. But south of the Mediterranean, they are already a reality. Earlier this month, the African Development Bank launched a $3bn three-year ‘Fighting Covid-19’ social bond on the London Stock Exchange. The bond is the largest dollar-denominated social loan transaction ever placed on capital markets. It is also the AfDB’s largest dollar benchmark, and its first listing on the LSE.

The issuance highlights three trends. First, despite an absence of institutional integration, African capital markets can be bold and innovative beyond the state level. This builds on financial innovation in recent years, as documented in our Africa Financial Markets Index report. Examples include the world’s first blue bond issued by the Seychelles, the green bond initiatives in Johannesburg, Lagos and Nairobi, and the Mpesa mobile payments system launched in Kenya. As AfDB President Akinwumi Adesina noted, while social distancing is imperative, the pandemic is ‘no time for fiscal distancing’.

Second, environmental, social and governance investment considerations are more important than ever. The pandemic provides further incentives to speed up progress on creating instruments to invest sustainably.

Third, it highlights the importance of public investors in the ESG arena. More than half of the AfDB bond was reported to have been allocated to central banks and official institutions. Many public asset owners including Japan’s Government Pension Investment Fund, the world’s largest pension fund, invested in the bond. In OMFIF’s latest survey of global public investors, many reserves managers cited the lack of supply of eligible assets as an obstacle to scaling up their ESG investments. They added that provided the instruments are there, they are ready to invest.

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Πηγή: omfif.org