IFC Issues $2 Billion Social Bond to Support Low-Income Communities in Emerging Markets

Largest Ever Social Bond Issued by IFC and the Largest US Dollar-Denominated Bond by a Supranational Organization.

The International Finance Corporation (IFC), a member of the World Bank Group, has raised $2.0 billion through a three-year social bond to support low-income communities in emerging markets. This bond issuance, IFC’s largest ever, also marks the largest US dollar-denominated social bond issued by a supranational entity. The demand for the bond was immense, with the order book reaching a total size of $11 billion — IFC’s largest-ever order book for a single bond transaction.

Following a successful 1 billion Australian dollar denominated social bond issued last week, this new US dollar bond reflects the growing interest in socially responsible investments that address pressing global challenges, such as rising inequality, poverty, and access to basic services. IFC’s Vice President and Treasurer, John Gandolfo, emphasized the importance of social bonds in directing capital towards essential projects in emerging markets. "This bond will unlock additional funding for vulnerable communities and underserved groups in emerging markets in areas such as health, education, and food security,” Gandolfo stated.

The bond issuance follows IFC’s updated social bond framework, which was published last week. The framework received an "excellent" rating from second opinion provider Sustainable Fitch, confirming its alignment with the International Capital Market’s Social Bond Principles. This framework underscores IFC’s commitment to supporting projects that directly benefit underserved populations in developing countries.

Unprecedented Global Demand and Strong Investor Support

The bond issuance saw a robust global response, with an orderbook that grew steadily throughout the marketing process, reflecting strong investor interest. Barclays, Goldman Sachs, Nomura, and SEB served as joint lead managers for the transaction. The high demand for the bond, which was five times oversubscribed, allowed IFC to tighten the spread by four basis points from initial price thoughts, a testament to the corporation's strong credit quality and global appeal.

"Despite a crowded market, IFC achieved an upsized transaction at minimal new issue concession, demonstrating the strong backing of its credit by global investors," said Alex Paterson, Managing Director at Barclays.

Dorothee Amar, Managing Director at Goldman Sachs, highlighted the success of the transaction, saying, "This marks IFC’s largest orderbook ever, with orders from central banks, official institutions, bank treasuries, and real money investors from across the globe."

Supporting Key Social Projects

The proceeds from the IFC’s social bonds will fund a wide range of initiatives aimed at improving the lives of low-income communities in emerging markets. These projects include affordable basic infrastructure such as clean drinking water, sanitation, energy, and transportation; access to essential services like health and education; affordable housing; and support for women-owned small and medium-sized businesses that face barriers to financing. Additionally, IFC’s social bonds aim to strengthen food security and support businesses that incorporate people from the base of the economic pyramid into their value chains.

IFC is a leading global issuer of social bonds, regularly issuing bonds in public and private markets across different currencies and tenors. The corporation’s commitment to social bonds is part of its broader mission to promote sustainable economic development, alleviate poverty, and foster resilience in emerging markets.

A New Era for Socially Responsible Investment

The issuance of this record-breaking $2 billion social bond underscores the growing significance of socially responsible investments in addressing global development challenges. With climate change, social inequality, and other critical issues looming large, initiatives like IFC’s social bonds are crucial in channeling resources to where they are needed most, enabling progress towards achieving the United Nations Sustainable Development Goals (SDGs) and improving the livelihoods of vulnerable populations worldwide.