(Bloomberg) -- A $1.8 trillion corner of the sustainable debt market is defying the wider downturn, as investors snap up bonds largely backed by US government agencies even as Donald Trump leads a green retreat.
Sales of so-called social bonds, which direct proceeds to areas like health, housing and education, jumped about 130% to $657 billion globally last year, and continued at a similar pace in the first quarter, according to data compiled by Bloomberg Intelligence. Issuance now rivals the traditionally larger market for green bonds, the data show.
Social bonds have emerged as a shelter of sorts for ESG (environmental, social and governance) investors, as climate-related issues become increasingly contentious with Trump pulling green funding and promoting fossil fuels. The bonds now have $1.8 trillion outstanding, compared with green bonds at $3.9 trillion.
The flow of social bond deals may continue “even if there is a backtrack on some climate commitments,” said Ulf Erlandsson, chief executive officer of Anthropocene Fixed Income Institute, a nonprofit that promotes debt markets to mitigate climate change. Still, given the notes are based more on social constructs than science, there are risks the debt is “even more politically sensitive” in the US, he added.
The surge in social bond issuance has significant ties to the Government National Mortgage Association, known as Ginnie Mae. The increase follows the expansion in 2023 of the definition for the US agency’s so-called social mortgage-backed securities, which now allows investors to categorize Ginnie Mae MBS as social if they choose. Ginnie Mae guarantees the principal and interest payments of MBS composed of mortgages for certain populations of homeowners, including veterans, low-income families and first-time homebuyers.
The US housing agencies have been responsible for a majority of this year’s $149 billion in new deals, with Ginnie Mae accounting for almost two-thirds of that. Fannie Mae and Freddie Mac have issued a combined $13.2 billion.
France’s social debt fund, along with International Finance Corp. and Korea Housing Finance Corp. have also sold debt this year. Banks underwriting social bond deals include JPMorgan Chase & Co. and BNP P
aribas SA.
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