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SEC backs ‘social bonds’ to help fund recovery efforts

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THE Securities and Exchange Commission (SEC) said it is encouraging bond issuers to tap the social bond market to help support economic recovery efforts.

In a statement Tuesday, the regulator said the proceeds of such bond issues could help contain the socioeconomic impact of the pandemic and build resilience against future shocks.

“COVID-19 has given rise to serious socioeconomic issues globally, pushing enterprises to the brink of failure and leaving millions of people jobless,” SEC Chairman Emilio B. Aquino said in the statement.

“The social bond market could boost our response to and recovery from the pandemic by unlocking the much-needed capital for the promotion of public health, reopening of businesses and preservation of jobs, among others,” he added.

A social bond’s proceeds are directed towards projects directly addressing specific social issues.

Last week, the SEC approved the social bond issue plans of the Bank of the Philippine Islands (BPI), which aims to raise at least P3 billion from what it calls COVID Action Response (CARE) Bonds.

Proceeds from the CARE Bonds will go towards supporting eligible micro, small and medium enterprises.

The SEC said such bonds may help generate funds for loans to small businesses to support employment and prevent job losses.

“While they seek to achieve positive social outcomes for target populations, social bonds may likewise finance projects that address the needs of the general population, given the far-reaching impact of the COVID-19 pandemic and any resulting socioeconomic crisis,” the SEC said, citing the International Capital Market Association.

Financial institutions such as BPI may use proceeds from social bonds to provide loans for small businesses. In other cases, such as for pharmaceutical firms, the bonds could support research and development to find treatments for COVID-19 (coronavirus disease 2019). Manufacturers could receive support in producing safety equipment and hygiene supplies.

“We hope more companies will explore the social bond market to pursue socially-relevant and impactful projects, especially in this time of unprecedented global health and economic crisis,” Mr. Aquino said. — Denise A. Valdez





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