European social bond takes off this summer

In their search for customers, asset managers try to differ themselves from their competitors and Columbia Threadneedle Investment is no exception to this rule. Social bonds are the next wager.

Everybody's already selling and buying green bonds and getting a greener and more environmentally friendly profile to their portfolio in this way. But if you want to go one step further and put the "S" in "ESG" you could consider diving into a social bond strategy. So says asset manager Columbia Threadneedle.

"Everybody has been talking about green bonds and climate for a long time now. But the next big thing is social bonds. Once you have your climate profile in place, the next layer in the portfolio is acting correctly socially. And you can do that through social bonds," Ulrik Holm Oxfeldt explains.

In December 2013, Columbia Threadneedle launched a UK-based social bond strategy and within the next couple of months the follow up will be ready: A European social bond.

It's the governments job

Scandinavia alreasy prides itselv on socially responsible models of society. Even people in America have noticed and some even thought it would be a good idea if the US became more like Scandinavia. So why would Scandinavian investors buy a social bond, when they have their governments, their municipalities, and other authorities to make sure that the social gaps and infrastructure problems do not become too large?

"If we look at the companies and investors who invested in our UK social bond fund, a lot of them are from continental Europe, and why would they invest in a British socially sustainable product, if they didn't think it gave them the profile they wanted to have?" Ulrik Holm Oxfeldt says.

Ulrik Holm Oxfeldt underlines that Scandinavian projects can also obviously be part of the portfolio as long as the projects fulfill the criteria set forth.

The areas targeted are education, public health (hospitals), housing, and other clusters of social activities fit for this type of investment.

Social discrepancies are a global challenge

Couldn't it be, that you are pretty much alone in this market, not because you are a first mover, but because your competitors do not see a demand from their customers for this kind of paper?

"No I really don't think so. This is a question of the investors getting to the point where they realize that there is more to a responsible profile than just the environment. I think most people have realized by now that if we want a more even social spread across the world we need to take on an extended CSR responsibility. Now we give them a possibility to take on that responsibility," Ulrik Holm explains.

There is no external supervisory body attached to the social bonds. There are advisory boards and investment committees set up with external advisors from independent charitable groups.

The external advisors and external members of the investment committee in the UK come from Big Issue Invest, an investment arm from the The Big Issue Magazine and the Big Issue Foundation. Organizations, which help the homeless in the UK.

The external advisors on the European fond will also come from a European based societal entity, as yet to be defined.

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