IFC subscribes to $150-million worth of UnionBank bonds

International Finance Corp., a member of the World Bank Group, is investing $150 million (roughly P7.5 billion) in a seven-year social bond to be issued by the Aboitiz-led Union Bank of the Philippines, the country’s seventh-largest private-sector bank.

To be issued under UnionBank’s new sustainable finance framework, it will be the first social bond by the bank and its longest-term US dollar-denominated bond to date. It also marks only the second social bond of its kind in the Philippines.

IFC said tens of thousands of jobs are expected to be created over the next seven years through this issuance that will help smaller businesses recover from the impact of the COVID-19 pandemic.

Proceeds from the bonds are expected to finance over 2,000 loans to micro, small and medium-sized enterprises, which have been disproportionately impacted by COVID-19.

IFC’s investment will also help UnionBank boost financing for MSMEs through its supply chain financing platform, enabled using digital technologies.

“In the wake of the COVID-19 crisis, the use of social bonds to generate financing to meet the needs of vulnerable underserved people, including small businesses, will be critical to helping spur the recovery,” said Alfonso Garcia Mora, vice president, Asia and Pacific at IFC, who took part in the signing ceremony for the investment.

“This landmark deal marks IFC’s first COVID-19 response social bond investment in Asia and will help create jobs, strengthen and deepen the country’s capital markets, and contribute to the development of a more resilient, efficient and inclusive financial sector,” Mora said.

Jose Emmanuel Hilado, chief financial officer of UnionBank, said the goal in issuing this bond is to support the recovery of MSMEs from the COVID-19 pandemic.

“We are confident that we can achieve this through the use of IFC’s long-term funding and by leveraging our supply chain financial platform. It could not have come at a better time, as this market segment has been hit particularly hard by the current crisis,” Hilado said.

MSMEs in the Philippines accounted for over 90 percent of businesses and over 60 percent of jobs pre-COVID-19, but MSME loans just contributed 6 percent to the total bank loans in the country. This makes increasing access to MSME financing critical to fostering a resilient and inclusive recovery.

With social bonds targeting projects that aim to achieve positive social outcomes, the issuance can pave the way to open the social bond market in the Philippines, replicating IFC’s success opening the market for green bonds in the country and deepening capital markets for thematic bonds.

The bond is aligned with the International Capital Markets Association’s social bond principles and the ASEAN Social Bond Standards, as confirmed by a second-party opinion provided by ESG research and ratings company Sustainalytics.

As of the end of fiscal year 2020, IFC had issued 53 social bonds in public and private markets in 11 different currencies. Since 2017, IFC social bonds have supported 153 eligible projects totaling $4.3 billion, reaching 2.6 million farmers, feeding three million people and treating 1.6 million malnourished children.

IFC more than doubled its issuances of social bonds in 2020 amid the pandemic.

IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. It works in more than 100 countries, using its capital, expertise, and influence to create markets and opportunities in developing countries.

In fiscal year 2020, it invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity.

UnionBank, on the other hand, has always been among the first to embrace technological innovations to empower its customers. It has consistently been recognized as of one of Asia’s leading companies, ranking among the country’s top universal banks in terms of profitability and efficiency.

Topics: International Finance Corp. , World Bank Group , Union Bank of the Philippines
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