How Positive "Impact Bonds" Build on Strong Foundations

Dec 16, 2019 10:10 AM ET

How Positive "Impact Bonds" Build on Strong Foundations

by Benjamin Bailey, CFA, Praxis Mutual Funds & Everence Financial 

Praxis Mutual Fund shareholders expect us to invest with their values in mind. The Praxis Impact Bond Fund turned 25 this year and through the first half of the fund’s tenure we diligently focused on screening out holdings contrary to those shared values. In 2006, our eyes were opened by a public bond offering that showed us what positive impact bonds (those bonds that make a positive impact on the climate and/or communities) could do.

For years the Praxis Impact Bond Fund had excluded “unaligned” issuers and invested nearly 1 percent of the fund in Community Development Investments. But with the advent of impact bonds, the opportunity to purchase bonds that promoted our core values while earning a market rate return was exactly what our investors desired before they knew it was possible.

Since 2009, issuance of green, social and sustainability bonds has exploded. According to the Climate Bond Initiative there has been about $190 billion in green bond issuance globally year to date through mid-October 2019. This already surpasses the $171 billion and $156 billion issued in 2018 and 2017, respectively.

This phenomenon extends beyond environmentally-focused initiatives. According to Bloomberg there has already been $49 billion in sustainability and social bonds issued in 2019, which is on pace to double the $29 billion issued in 2018. We expect these markets to continue to grow in the hundreds of billions of dollars each year because both issuers and investors want to make an impact on the world that we share. According to Bloomberg there is over $600 billion in sustainable debt (green, social and sustainability) outstanding at this time. 

Read the rest of Mr. Bailey's very informative article and his full bio here