Social bonds have been one of the main issues at stake at the European Commission these days. Indeed, for the first time in history, the European Commission has issued an initial social bond of €17 billion to protect jobs, and finance Member States’ short-work schemes as a response to the Covid-19 pandemic under the SURE (Support to mitigate Unemployment Risks in an Emergency) instrument.
At least 17 Member States will receive such financial support for which the Commission has announced a total amount of €87.8 billion.
How are these social bonds issued?
The EU SURE is designed to provide urgent financial assistance in the form of loans to those Member States, which experienced severe increase in expenditure for the preservation of the employment due to the pandemic crisis. The financial support will meet national measures and will be channelled by the EU to the beneficiary Member States.
What is the importance of this financial measure?
The use of social bonds under the SURE instrument will allow the investor community to allocate their funds towards the social needs of the Member States hit by the Covid-19 crisis. This approach will also contribute to the development of the social bond market by promoting transparency, while encouraging the measure of social impact of the financed expenditures. This rapid and coordinated response of the EU to the generalised labour and market crisis marks once again the strong spirit of solidarity among Member States.
The IATE Term of the Week is dedicated to this recent term, already used in the field of Finance to describe a “contract with the public sector or governing authority” ensuring “better social outcomes”, and granting “part of the savings achieved to investors”. The term is also widespread in its synonyms social impact bond, social benefit bond, or Social Investment Bond, among others.
Following the most recent measures adopted at the EU level, this term will acquire new meaning, and will probably embrace new domains of use in the context of Covid-19-related discourses.
This week, you can tune in to another IATE goes Audio feature: click below to listen to ‘Social Bond’ explained in English.
European Commission. 2020, Press release. [ONLINE] Available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1954 [Accessed 06 November 2020].
European Commission. 2020, EU SURE Social Bond Framework. [ONLINE] Available at: https://ec.europa.eu/info/sites/info/files/about_the_european_commission/eu_budget/eu_sure_social_bond_framework.pdf [Accessed 06 November 2020].
Borsa Italiana, Glossario [ONLINE] Available at: https://www.borsaitaliana.it/borsa/glossario/social-bond.html
[Accessed 06 November 2020].
Written by Diandra Falchieri & Marina Niceforo