The Covid-19 pandemic is rooted in environmental crisis, including in particular the anthropogenic degradation of biodiversity. Climate change is also expected to increase the frequency and severity of future pandemics. Beyond its public health consequences, the Covid-19 outbreak has resulted in significant economic and social impacts in Singapore and elsewhere, and is the first major test on our resilience to cataclysmic environmental shocks. Societies and businesses will need all the public and private financial support they can muster to firstly, mitigate against continuing biodiversity loss and climate change; and secondly, build back better from this pandemic through better preparation for and protection from future pandemics and the other direct and indirect shocks expected to come our way. This update looks at the use of private social financing to support the latter. 


Social financing is the dedicated use of proceeds from debt financing to achieve one or more positive social purposes or outcomes. With social bonds already described as the next frontier for environmental, social and governance investors"1 even prior to the Covid-19 pandemic, the pandemic has become a focal point for social financing in the same way that climate change became a focal point for green financing.2 The pandemic threatens several of the United Nations Sustainable Development Goals, including the eradication of poverty and hunger, good health, quality education, decent work and economic growth, industry, reducing inequality; and has once again drawn attention to the urgency of concurrently addressing the environmental and social components of these Goals. Funding to achieve these goals from the public coffers alone will not be adequate; private investment has a role to play. While supranationals, sovereigns and agencies have led the way in mobilising private sector efforts in this regard,3 corporate entities such as pharmaceuticals and personal protective equipment manufacturers are also expected to show more interest in social bond issuances.4

Social Bonds and Sustainability Bonds 

Under the Social Bonds Principles issued by the International Capital Markets Association,5 social bonds are characterised by their four elements, namely:

  1. Use of proceeds;
  2. Process for project evaluation and selection;
  3. Management of proceeds; and
  4. Reporting.

Unlike green bonds under the Green Bond Principles, whose proceeds are put to green purposes, the social project categories under the Social Bond Principles include, but are not limited to, providing and/or promoting:

  • Affordable basic infrastructure (e.g. clean drinking water, sewers, sanitation, transport, energy)
  • Access to essential services (e.g. health, education and vocational training, healthcare, financing and financial services)
  • Affordable housing
  • Employment generation including through the potential effect of SME financing and microfinance
  • Food security
  • Socioeconomic advancement and empowerment;   

and the illustrative target populations of the Social Bond Principles, namely those that are:

  • Living below the poverty line
  • Excluded and/or marginalised populations and/or communities
  • Vulnerable groups, including as a result of natural disasters
  • People with disabilities
  • Migrants and/or displaced persons
  • Undereducated
  • Underserved, owing to a lack of quality access to essential goods and services
  • Unemployed

Building on the Social Bond Principles, the ASEAN Capital Markets Forum's ASEAN Social Bond Standards further require that the issuer or issuance of the social bond must have a geographical or economic connection to the region. The Standards also exclude the use of proceeds for activities that pose a negative social impact related to alcohol, gambling, tobacco and weaponry.6

A variant of the social bond is the sustainability bond, where instead of using proceeds to exclusively finance social purposes, proceeds are used to finance a combination of green and social purposes.7 It is pertinent to consider the intimate relationship between environmental causes and social impacts and vice versa so as to contribute holistically to the attainment of the SDGs.

Covid-19-Related Purposes

ICMA has suggested as illustrative examples for eligible Covid-19-related expenditures:

  • Increasing capacity and efficiency in provisioning healthcare services and equipment; 
  • Medical research;
  • SME loans that support employment generation in affected small businesses; and
  • Projects specifically designed to prevent and/or alleviate unemployment stemming from the pandemic.

For this purpose, as the general population is likely to be affected by the pandemic, social bonds, while seeking to achieve positive social outcomes for target populations, may also serve to address the needs of the general population.8

The International Finance Corporation has also published a list of illustrative Covid-19-related uses of proceeds; and targeted populations:

  • Research and development of COVID-19 tests, vaccines and/or other medications intended to alleviate symptoms of the infectious virus; targeting the general population but especially those most vulnerable to the virus, including the elderly and those with underlying health conditions;
  • Loans to small businesses negatively impacted by the economic slowdown from COVID-19; targeting small businesses and employees at risk of financial distress/ unemployment as a result of COVID-19 control measures; and
  • Manufacturing or modification of existing machines to produce, and/or production or increased production, of health safety equipment and hygiene supplies; targeting the general population given the widespread nature of COVID-19, but especially healthcare workers, who are particularly vulnerable to exposure.9

  In similar vein, according to ESG solutions provider, Sustainalytics, preliminary indications of Covid-19-related use of proceeds for social bonds are in healthcare services, healthcare supplies and equipment, pharmaceuticals, health insurance, and impacts on SMEs and employment.10  

Determining whether a purpose and target population are suitable objects for social financing will involve universal and contextual considerations. In Singapore, the pandemic has created new vulnerabilities and aggravated existing ones. The recent announcement by the Monetary Authority Singapore of a new facility to help financial institutions lower the cost of loans to small and medium enterprises for working capital or temporary bridging flags short-term SME liquidity as a priority measure. The importance of strengthening food security has also been highlighted.11 More equitable working opportunities and conditions (and in the case of migrant workers, living conditions as well) for migrant workers, women, low wage workers, and freelancers as well as the diversification of products and services to cater to the needs of underserved groups12 may also be meaningful outcomes for strengthening the resilience of businesses in Singapore and their supply chains as part of a post-pandemic recovery that builds back better.

Social Loans? 

Where bonds are not suitable debt instruments because of the quantum or tenure of financing required, a social loan may be a more suitable alternative form of financing. 

When the Green Bond Principles were first released in 2017 by the ICMA, it was soon followed by the release of the Green Loan Principles by the Asia Pacific Loan Market Association, Loan Market Association, and Loan Syndication & Trading Association in 2018, modelled along the lines of the Green Bond Principles. Green loans complement green bonds. 

However, since the Social Bond Principles were released, there has not been any release of a set of Social Loan Principles. The Covid-19 pandemic is an opportune time to consider the adoption of Social Loan Principles, drawing from the work done for the Social Bond Principles and Green Loan Principles.

In the meantime, second party opinions may be sought for social loans along the lines of the same four components as the Green Loan Principles and the Social Bond Principles; but such that instead of the green use of proceeds, the illustrative social project categories and target populations of the Social Bond Principles are referred to for guidance. 

There is a recent precedent for this. In March this year, ACWA Power and Natixis announced that ACWA Power had obtained a sustainable loan qualification for its Taweelah IWP desalination plant project in the Emirate of Abu Dhabi. The reverse osmosis plant is expected to almost double the volume of water supply available to the local water network and population, to meet the projected doubling of local water demand by 2050, and obtained a second party opinion to the effect that the project finance loan is aligned with the four components of both the Green Loan Principles and the Social Bond Principles.13


1 Agnes Gourc, "Social Bonds: The Next Frontier for ESG Investors" (2019)   

2 ICMA, "The Rise of Social Bonds"  (2 April 2020) ICMA Podcast.

3 See LexisNexis, "Can the Debt Capital Markets Help Address the Coronavirus (COVID-19) Crisis?" (2 April 2020)

4 David Caleb Mutua, "Nuveen Expects Rush of Social Bond Issues to Tackle Pandemic" (28 April 2020) Bloomberg Green

5 ICMA, Social Bond Principles (2018)

6 ACMF, ASEAN Social Bonds Standards (October 2018)

7 ICMA, Sustainability Bond Guidelines (June 2018) ; and ACMF, Sustainability Bond Standards (October 2018)  

8 ICMA, "Q&A for Social Bonds Related to Covid-19" (31 March 2020) . See also ICMA, Green, Social & Sustainability Bonds: A High-Level Mapping to the Sustainable Development Goals (June 2019) .

9 IFC, "Social Bonds - Illustrative Use of Proceeds Case Studies: Coronavirus" (March 2020)

10 Kevin Ranney, "Responding to COVID-19 through Social Bonds" (8 April 2020)

11 "COVID-19 Pandemic Highlights Importance of Strengthening Singapore's Food Security, Say Experts" (19 April 2020) Channel NewsAsia

12 See for example, Anthea Ong, "COVID-19 Has Revealed a New Disadvantaged Group Among Us - Digital Outcasts" (31 May 2020) Channel NewsAsia ; and Hariz Baharudin, "New Office to Drive Digitalisation Nationwide and Reach Out to Seniors, Hawkers" (31 May 2020) The Straits Times

13 "Taweelah IWP Obtains the First Ever 'Sustainable Loan' Qualification for Desalination Project" (16 March 2020) WaterWorld

Originally published June 2020 .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.