Social bonds: a young market for the old

Regional governments in several European countries could find problems funding 'the high cost of providing long term care (LTC) for their ageing populations' in the coming years, according to a Moody’s report on Tuesday. If ever there was a perfect market to be funded by the burgeoning social bond sector, this is it.

  • By Craig McGlashan
  • 03 Jul 2018
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Moody’s highlighted the Nordic countries, Spain, France and the UK as being among those most likely to face credit pressures related to long term elderly care, while pointing out that by 2070 some 29% of the European Union’s population will be over 65, up from 19% in 2016, while 13% will be over 80.

“The cost of providing long term care will become a major challenge for European regional and local governments as their populations age," said Zoe Jankel, a Moody’s senior analyst and author of the report, in a note accompanying it. “Provision of care is often devolved to [regional and local governments] and it can represent a high proportion of budgets.”

Regional governments in Europe have already been increasing their presence in the bond markets over the last decade as central government support has fallen. 

Several have dipped into the green bond market. But given the Moody’s report and the undeniable facts on aging it poses, they should definitely consider moving beyond green into social.

The extra scrutiny of projects that the social bond model provides would be extremely valuable in funding a sector focusing on some of the most vulnerable in society. 

That could be especially welcome in the UK, where there have been a string of scandals about poorly run care homes owned by private equity firms via complex financial webs.

Regional and local authorities using the social bond market — which often allows issuers to borrow with lower new issue premiums than via conventional debt — to build the undoubtedly necessary extra facilities for the growing number of elderly people in the coming decades could be one of the best uses of the SRI market to date.

The elderly are not explicitly mentioned in the Social Bond Principles, but clearly fall under the ‘vulnerable groups’ example of target populations — meaning a care home building social bond should fall neatly into its requirements.

Some SRI investors are also looking for small, project-themed bonds from issuers. That means there could be a place for even small local authorities to enter this market.

Social bonds for the elderly are a no-brainer — let’s just hope regional governments realise that, too.

  • By Craig McGlashan
  • 03 Jul 2018

European Sovereign Bonds

Rank Lead Manager Amount €m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 9,951.14 12 13.89%
2 Citi 7,280.23 9 10.16%
3 HSBC 5,813.76 5 8.12%
4 BNP Paribas 5,802.58 8 8.10%
5 Barclays 5,746.99 7 8.02%

Dollar Denominated SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 9,140.46 20 12.14%
2 JPMorgan 8,485.94 17 11.27%
3 Barclays 7,215.80 13 9.59%
4 Bank of America Merrill Lynch 5,863.94 19 7.79%
5 HSBC 5,764.61 9 7.66%

Bookrunners of Euro Denominated SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 15,490.59 23 10.81%
2 Credit Agricole CIB 13,234.00 19 9.24%
3 HSBC 11,041.26 21 7.70%
4 Goldman Sachs 10,202.29 12 7.12%
5 Barclays 10,190.11 13 7.11%

Bookrunners of Global SSA (Excl US Agency)

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 25,051.88 71 8.78%
2 Barclays 21,533.79 49 7.55%
3 HSBC 20,527.83 55 7.20%
4 Citi 19,220.14 43 6.74%
5 Bank of America Merrill Lynch 16,931.81 46 5.94%