CalSTRS Buys First Social Bond

$5 million investment will finance women-owned enterprises and projects for low-income communities.

The $202 billion California State Teachers’ Retirement System (CalSTRS) has announced its first social bond purchase, a $5 million investment that will finance women-owned enterprises and projects for low-income communities in emerging markets.

CalSTRS is one of more than 40 institutional investors to buy into a three-year, $500 million global benchmark bond issued on March 22 by the International Finance Corporation (IFC), part of the World Bank. The $500 million bond issuance has a maturity date of March 30, 2020, and was issued at a price of 99.942% and carries a coupon of 1.75%.

Proceeds from the bond will be invested in companies that source directly from smallholder farmers; utilities that provide low-income households with better access to services; companies that provide more affordable health and education services or housing to low-income populations; and in companies that provide goods and services to low-income populations, according to a statement from CalSTRS.

The bonds will also help companies that provide telecommunication and payment platforms in markets that include low-income users, and will assist lending to financial intermediaries that lend to women-owned enterprises.

Other institutional investors in the bond offering included Calvert Research and Management, the International Fund for Agricultural Development, the Praxis Impact Bond Fund, the QBE Group, the United Nations Entity for Gender Equality and the Empowerment of Women, and the United Nations Development Programme. Twenty percent of the investors were first-time investors in IFC bonds, the group said in a statement.

IFC said it created its Social Bond Program “to meet investor demand for regular benchmark issuance by merging two existing socially responsible bond products.” This included the Banking on Women Bond Program and the Inclusive Business Bond Program. Those two programs so far have raised $268 million and $296 million respectively since 2013.

CalSTRS made the investment as part of its sustainability effort. In its CalSTRS 2014–15 Sustainability Report: Fostering a Secure Future report, the fund said “sustainability is far more than an environmental concern. It also encompasses current and future economic and social issues.”

By Chuck Epstein