COVID-19 bonds – a market and investor perspective

The current corona crisis has given rise to a new label of sustainable bonds: COVID-19 bonds. With no established market practices for these bonds, issuers and investors are working together to find existing and new solutions for COVID-19-related funding, while safeguarding the integrity of the sustainable finance market.

Issuers of COVID-19 bonds* have been in the spotlight in the sustainable bond markets in recent weeks. The focus has been on what COVID-19 bonds are, who can issue them and how they can be aligned with current market standards, such as the Social Bond Principles.

However, a number of investors have come out with statements on COVID-19 bonds in the last few weeks. This is a welcome and positive development as it highlights key aspects of the sustainable finance market: engagement and transparency.

The market reception of COVID-19 bonds

The overall impression when talking to investors is that COVID-19 bonds provide a tangible and constructive opportunity for them to contribute in the current crisis. The reaction time of issuers was impressively short, considering the usual time-lags for setting up frameworks and aligning organisations internally.

Such a feat is a strong testament to the overall level of maturity the sustainable finance market has reached over the recent years. The foundation laid by first green bonds, and subsequently social and sustainability bonds, has undoubtedly been an important prerequisite for the rise of COVID-19 bonds.

Except for the Social Bond Principles, there are no current market practices to guide issuers and investors on COVID-19 bonds. For issuers lacking a Social Bond Framework covering coronavirus-related projects, the solutions have varied. One source of guidance has been ICMA (which holds the secretariat of the Green Bond Principles and Social Bond Principles) as can be seen here.

In a recent statement, French asset manager AXA IM highlights the challenge of the lack of standards, noting, “We support the development of the market but we will, of course, continue to analyse each and every COVID-19 bond issuance – as we do with green and social bonds. We will not simply accept the label at face value; every transaction in response to the pandemic will be studied to assess whether it should be eligible for this kind of investment.”

Guidelines to maintain trust in the sustainable bonds markets

Acknowledging the efforts made by COVID-19 bond issuers, investors have broadly been welcoming these initiatives with open arms and flexibility. A few investors have gone further and proactively issued statements or guidelines to give issuers support in their efforts.

One such investor is APG, the Dutch pension fund, that recently published such a set of guidelines. In their guidance they note that “we recognize the urgency of the current situation and believe it is appropriate to expand the use-of proceeds (UOP) definition to be more inclusive of COVID-19 related expenditures. We also believe this should be balanced with maintaining the integrity of the market. Therefore, APG has outlined a set of high-level guidelines and identified examples of corporate activities across various sectors that may potentially qualify as eligible use of proceeds.”

While investors appreciate the increased need for flexibility in the current circumstances, their requirements are largely focused on maintained transparency, reporting and alignment with current market standards to the highest possible extent. As AXA IM notes in their statement, “we have developed an investment framework which expects transparency from issuers around how proceeds will be used to support their response to the pandemic. We also call for a commitment to outcome and impact measurement.

Looking ahead – what to expect

The rise of the COVID-19 bond is certainly an impressive achievement when considering speed, market applicability and ensuring integrity. The fact that investors have recently chipped in on these discussions is a further positive sign for the future development of the sustainable finance market.

Although we should not expect investors to do the work for the issuers, it is certainly encouraging to see a sustainable finance market that appears to be more dynamic, vibrant and engaging than previously. Looking ahead we can hope, as we do expect, that this becomes a more permanent feature of the market.

*What are COVID-19 bonds, and why do they matter? Find out more in this related article. Note that we have previously referred to such bonds as “corona bonds.” In this article, we will refer to them specifically as “COVID-19” bonds.

About the authors:

Ebba Ramel, an analyst in Nordea's Sustainable Bonds team


Ebba Ramel is an analyst in Nordea’s Sustainable Bonds team.



Jacob Michaelsen, Head of Nordea Sustainable Finance Advisory


Jacob Michaelsen is Head of Sustainable Finance Advisory at Nordea.

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