Investors are clamoring for ‘pandemic bonds.’ Here’s how Wall Street banks are revamping their businesses and senior execs are devising ways to capture the surging demand.

coronavirus wall street

Investors have been eagerly buying up pandemic bonds — debt instruments directly financing efforts to fight Covid-19.
Bonds tied to financing social projects like housing, healthcare, and education have long lagged beyond their environmental cousin, the green bond.
But social bonds have surged in response to the coronavirus outbreak, and Wall Street is betting the enthusiasm for such products will increase over the long haul as a result.
Wall Street banks in recent weeks have have unveiled new business units, appointed new leaders, and convened senior execs to devise ways to meet the growing demand for socially minded investments.
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Investors are clamoring for ‘pandemic bonds’ linked to the coronavirus recovery effort, and Wall Street banks are preparing for a deluge of similar socially-minded financing opportunities in response to the pandemic.

Investments that fund Environmental, Social, and Governance (ESG) projects have gained momentum in recent years — spurred on by shareholders, like BlackRock, that have demanded companies start accounting for their impact on society. Money has also been pouring into funds that screen for investments based on ESG factors, with global sustainable fund assets reaching a record $960 billion at the end of 2019, according to Morningstar.

But they’re a drop in the broader capital-markets ocean, and even amid their steady growth they’ve long been viewed with skepticism in some corners as a marketing gimmick to cleanse corporate brands or an extraneous luxury suited for times of economic abundance.

Amid a public health and financial crisis, Wall Street is betting the exact opposite — that the Covid-19 pandemic has fundamentally altered the mindset around such investments and that their future is brighter than ever.

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Just in recent weeks, banks have been rejiggering their businesses, appointing new leaders, and convening senior execs to devise ways to sate the client hunger for sustainable investments — financial products underwritten with clear targets for funding remedies to societal ailments.

Bank of America this week announced the closing of the first pandemic bond issued by a US commercial bank. The proceeds of the $1 billion bond will be allocated to new and existing healthcare clients the bank reasonably believes to be involved in fighting Covid-19, including not-for-profit hospitals, skilled nursing facilities, and manufacturers of medical supplies, according to the deal documents.

That deal is part of a broader surge in social bonds amid the outbreak. While financing for ESG projects plummeted to $59 billion in the first quarter, down 32% compared with the previous quarter, much of the decline was in green bonds, according to analysts at credit-ratings agency Moody’s. Meanwhile, social bonds — which fund efforts geared toward public health, education, food security, and affordable housing — tallied a quarterly record of $11.9 billion.

HSBC said the issuance of social and sustainability bonds, which can fund responses to both the public health and economic crises resulting from Covid-19, surged 69% in the first quarter compared with 2019.

Other banks have …read more

Source:: Business Insider


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