power your advice

Bank of America COVID-19 Social Bond - A Sign of the Times

Written by: Bailey Buckner, ESG and Impact Consultant 

COVID-19’s emergence has not only reminded us of our fragility as a species, it has revealed serious structural vulnerabilities that allow diseases like this to threaten the health and wellness of our citizens, our economy, and, perhaps most troubling, our healthcare system itself. We are currently facing a number of unique social challenges that will require buy-in from both the public and private sectors to solve.

Last week, Bank of America issued a social bond for the purpose of supporting eligible investments that address social issues related to the current COVID-19 pandemic. The size of the issuance was $1 billion and pricing was consistent with where a traditional BAML bond would price. Social investments eligible for funding include certain Bank of America clients who have been or are involved in COVID-19 response activities and who operate in any of the following healthcare subsectors: not-for-profit hospitals, skilled nursing facilities, healthcare equipment, and healthcare supplies.

Funding through this social bond issue targets populations affected by COVID-19, including the general public. This is not only advantageous to the recipients of that funding, but is also advantageous to Bank of America. By shielding its clients from funding shortfalls and contributing to overall healthcare access, BofA is seeking to protect its own financial and reputational interests.

This unique bond issue is a sign of the times. Not only does this issue respond to a clear and immediate public health crisis, it highlights the ‘S’ in ESG and in a way that can no longer be ignored. Conversations about access to affordable healthcare, social safety nets, and employee protections are no longer avoidable, as most Americans have been affected in some way by the pandemic.

This situation has also underlined the desperate need for environmental sustainability, as viruses like COVID-19 are predicted to become more frequent and more dangerous as a result of climate change. More immediately, cities around the world are experiencing cleaner air than they’ve seen in decades, providing millions with a tangible example of how pollution affects our lives.

Experts in the ESG and Impact Investing field have been fretting for months about what COVID-19 will mean for the future of ESG investing. The skeptics predict a regression by both issuers and investors in terms of sustainable and impact investing, but this prediction is proving unfounded.

In our view, Bank of America’s issuance of a COVID-19 social bond is proof positive that ESG matters and may serve as a template for deploying ESG and impact investing in the fight against the pandemic.

Note: The use of environmental, social and governance factors to include or exclude certain investments for non-financial reasons may limit market opportunities available to strategies not using these criteria. Further, information used to evaluate environmental and social factors may not be readily available, complete or accurate, which could negatively impact the ability to apply environmental and social standards.

There can be no assurance that any investment process or strategy will achieve its investment objective.

Source: Bank of America as of 5/14/20

Related: Financial Markets Shrug at Economic Weakness