COVID-19 effects are wide-ranging across populations and sectors, with no clear resolution in sight.  In response to the pandemic many countries around the world have announced initiatives to support employment, public health and individuals, including those with existing vulnerabilities and underlying health problems. 

In March 2020, the impact bond market saw the first examples of labelled COVID-19 bonds, from supranational entities such as African Development Bank’s (AfDB), Inter-American Development Bank (IDB) and Nordic Investment Bank (NIB), some of these are under existing social bond frameworks, or new frameworks, or have no accompanying framework. COVID-19 bonds thus far remain diverse in structure as well as activities funded.

We anticipate further issuance of COVID-19 bonds from supranational entities, government and related agencies and potentially from corporates as the pandemic unfolds. We note that the Social Bond Principles has issued a Q&A on Social Bonds related to COVID-19 in response.

Our robust SPECTRUM analysis will continue to be applied to COVID-19 bonds, which in our view, are another form of social, and potentially sustainability, bonds. SPECTRUM analysis can be applied to use-of-proceeds bonds as well as pureplay bonds (issued by entities with approximately 95% of revenues aligned to the AIM eligible sector taxonomy).

Currently our eligible social sector taxonomy already includes many COVID-19 relevant initiatives, such as: healthcare, protection for vulnerable groups, financial inclusion and sustainable enterprise, education, employment and training initiatives, food security and social housing.

Whilst acknowledging COVID-19 is a global emergency, we commit to upholding the same standard of analysis and minimum requirements for COVID-19 bonds as other types of impact bonds. This includes discernible use of proceeds, sufficient transparency, material impact and reporting, as well as creditworthiness and issuer responsibility. The ability to trace, track and report on bond proceeds remain critical for eligibility in our investment universe. We see risks to expected positive impacts in the absence of targeted proceeds expenditure and subsequent disclosure. 

COVID-19 bonds can be a powerful tool to help mitigate some of the devastating effects globally, and we encourage increased issuance of these social bonds. Our preference is for use-of-proceeds COVID-19 social bonds or pureplay issuance. Much like our approach to labelled green, social and sustainability bonds, we would not accept a framework solely because it is labelled but apply SPECTRUM analysis to determine eligibility in our investment
universe on a case-by-case basis.

We would also like to draw a distinction between pandemic catastrophe bonds and pandemic themed use-of-proceeds bonds. Currently we do not participate in catastrophe bonds due to portfolio suitability.

AIM also supports the investor statement on coronavirus response, calling for businesses to promote measures to support employment and employee welfare and safety during the pandemic.