On 18 September, LuxFLAG organised a breakfast seminar on social finance, hosted by KPMG Luxembourg. Simon Bond (Columbia Threadneedle), Cyril Gouiffès (EIF) and Anne Contreras-Muller (Arendt & Medernach) joined the panel moderated by Laetitia Hamon (KPMG).
The panel highlighted that evidence of social performance and at the same time proof of the financial returns achieved are key to grow social finance to a larger extent. Social bond structures can be a powerful and innovative tool to advance social development. The market is still lacking a significant amount of issuances but social and sustainability bonds can become as promising and successful as the green counterpart. Measuring social performance remains a challenge. Therefore, standards are needed to make comparable analyses. The green bond market boomed after standards were developed by the industry and the issued green bonds are mostly oversubscribed. The panel suggested that this could be replicated in the case of the social bond market, although social aspects might be much more challenging to standardize.
Evidence-based social scores can be one way to quantify social finance and can build the quality of social reporting. Detailed secondary measures e.g. in education and health care can help to get the whole picture of a company and spot the actors that really make the change. A lot still needs to be done to improve the measurement tools for the social value added. Delivering the social impact that has been promised during the fundraising process remains key to give the market confidence.
The panel pointed out that financial returns don’t need to be sacrificed in social finance - a crucial aspect that still needs to be clearly communicated to the market. In the current lack of common social definitions, a paradigm shift and the accountability of the stakeholders remain key to go beyond impact pitches. The idea was raised to create a social impact accelerator for fund managers in Luxembourg, with a similar approach to the International Climate Finance Accelerator, to boost the creation of social investment funds.
