Investors increasingly want to align their portfolios with both their financial goals and internationally recognized sustainability goals such as the United Nations Sustainable Development Goals (SDGs). At the same time, the attention of impact investors is shifting from environmental to social impact. Investing in social bonds can make a positive contribution to the ten Sustainable Development Goals relevant to the achievement of the world’s most pressing social goals. These SDGs range from tackling poverty, hunger and gender inequality to promoting high-quality education and work.
This new fund complements NN IP’s existing range of influential bond funds and follows a structured investment process similar to NN IP’s flagship green bond strategies.
While green bonds are already established as an asset class, social bonds are one of the fastest-growing segments of sustainable investment. They allow for the construction of a well-diversified portfolio and can replace part of the classic fixed income allocation without incurring additional credit risk. They also share the same characteristics as their more traditional counterparts when it comes to issuer exposure, rating, profitability and duration.
Bram Bos, Lead Portfolio Manager Green, Social and Impact Bonds at NN Investment Partners, said: “We are delighted to continue our dynamism in terms of the impact of the investment space andcan play an important role in financing human development initiatives. The issuance of social bonds increased in 2020 and 2021, in particular to finance social projects focused on countering the long-term effects of the pandemic. Meanwhile, the social bond market caught up with other influential bonds. It currently has a capitalization of over € 400 billion and offers opportunities to invest in a well-diversified portfolio of social bonds. For 2022, we expect emissions to amount to EUR 250 billion. We see positive development opportunities and look forward to entering the social bond market and working for a better future. “
The fund invests primarily in global social bonds and high-quality euro money market instruments (AAA to BBB-), but may also include sustainability bonds with at least half of the proceeds going to social projects. It focuses in particular on investing in social and sustainable bonds, the revenues of which benefit social projects that promote affordable basic infrastructure, including water and sanitation, access to basic education and health services, affordable housing, employment, food security and economic advancement and empowerment.
Roel van Broekhuizen, Portfolio Manager Green, Social and Impact Bonds at NN Investment Partners, adds: “Only bonds that finance projects that comply with the Social Bond Principles are considered, but we go beyond mere labeling. All investments are subject to a detailed ESG review at issuer level and a rigorous social bond assessment that includes the use of proceeds, project valuation, impact management and reporting on expected social impact. In addition, we are in constant contact with issuers to prevent social laundering and use our experience in the green bond market to do so effectively. This way, investors can be sure that the portfolio will only include bonds that meet our strict criteria. “
Photo: Bram Bos © NN Investment Partners,
Source: fixed-income.org – A platform for investors and issuers in the bond market.