ICO launches its second "Social Bonds" issue for €500 million
These bonds are intended to finance SMEs in regions with a per capita GDP below the national average to create or preserve jobs.
This second operation will consolidate ICO's presence in the "Social Bond" market, with €1.5 billion issued to date.
ICO is strengthening its leadership strategy in this innovative product, broadening its investor base while leveraging the impact of its financing on Spanish businesses.
ICO has launched its second "Social Bond" issue in the capital markets as a €500 million benchmark issue.
Social bonds form part of what are known as "Sustainability Bonds" in the international capital markets. This type of bond issue is used to finance operations that generate a positive social or environmental impact.
This second operation launched by ICO totals €500 million and pays an annual coupon of 0.10% with a two-year maturity. The lead arrangers for the issue were BBVA, Crédit Agricole and HSBC. The issue has generated great interest among investors with an order book of over €2 billion, with socially responsible investors representing 47% of the total issue.
By investor type, there was significant demand from investment funds, accounting for 52%, while the rest of the issue was placed with banks (21%), insurance companies and pension funds (15%) and central banks (12%). Geographically, 64% was placed outside of Spain, mainly in Germany and Austria (18%) and Holland (16%).
ICO's social bonds are aimed at creating or maintaining jobs in the most disadvantaged regions of Spain, meaning those with a per capita GDP below the national average.
Commitment to investors
To certify that the funds raised by the social bonds are used to finance businesses that meet the eligibility criteria, ICO has agreed to publish reports on the recipients of the funds on the first anniversary of each issue. These reports will be reviewed by a ratings agency that will certify that the loans meet the eligibility criteria.
Accordingly, in February 2016 ICO published the report on its first social bond issue, which took place in January 2015 totalling €1 billion. This report states that 23,254 SMEs were financed from the capital raised from this issue. According to internal studies conducted by ICO based on information provided by the borrowers of its financing facilities regarding the impact of the social bonds, it is estimated that more than 6,600 jobs were created in 2015 thanks to these bonds (1.9% of the total jobs created in the target regions) and over 150,000 jobs were maintained (1.6% of the employment in the target regions).
ICO continues to be at the forefront of global trends in developing the sustainability bond market thanks to this issue, and is the leader in Spain for these types of social bond issues. Furthermore, it is responding to investor demand for these types of products, broadening its investor base. Lastly, this operation is testament to ICO's commitment to sustainability and to supporting the Spanish business sector.