Rathbone managers add covid-19 response bonds to Ethical portfolio

Bryn Jones and Noelle Cazalis purchase the first ethical bonds issued to aid the response to the covid-19 crisis


Natalie Kenway

The managers of the Rathbone Ethical Bond Fund, Bryn Jones and Noelle Cazalis, have purchased the first bonds issued to aid the response to the global covid-19 pandemic

As the coronavirus disease continues it spread across the world, a number of institutions have issued bonds to help those in need.

Jones and Cazalis said in a statement: “The performance of the new issues market has been strong, led by big initial concessions. We bought deals in the form of the African Development Bank’s Covid-19 response bond – a five-year social bond – for those in need of medical help in Africa. And in a similar vein, the Inter-American Development bank – also a five-year bond – to help Latin America.”

These are the first bonds believed to be issued in direct response of the pandemic, while Austria has also issued a large amount of debt to fight the crisis, and the managers said we will likely see similar issuance.

“Emerging market debt is optically cheap but we doubt the health systems in those regions are set up to fight a pandemic. We expect to see more supra-nationals issue these bonds to help those in the developing world and we will be monitoring them closely.”

The pair highlighted throughout history the debt markets have been used to help certain public health issues. Most recently, for example, debt was issued by the IFFim to fund vaccine research to help fight disease around the world.

Jones and Cazalis said bonds of these type, issued by strong AAA supranationals, are not particularly high return but offer low risk and fit with the £1.6bn Ethical Bond Fund’s social goals.

They said: “These bonds are a perfect fit for what we are trying to achieve in the fund, and where finance can really make a difference and help to define social responsibility.”

ESG Clarity’s editorial panellist Craig Hart, client relationship manager at King & Shaxson Ethical Investing, said the response from bond issuers in these unprecedented times has, thankfully, been rapid.

“We have seen organisations raise cash previously linked to proceeds to aid immunisation and that is something our clients look to access with their capital.

“Regarding this issue, as long as the proceeds are put to use immediately to lessen any further impact of Covid-19, this is a great news story. Having tuned into a recent webinar with Bryn Jones and the team, I would echo his comments regarding the role and responsibility that capital markets will play in providing finance in this crisis. Whether this is to fund vaccines, trials, or to provide finance to less economically developed countries to tackle the outbreak, it shows it is possible to marry together social impact and financial returns. Rathbone’s response to immediately provide capital is the exact reason we invest our clients’ money into this fund.  

“I do believe we will see more capital raised and invested to address this crisis going forward.”

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