APG has invested $50 million in a sustainable bond that addresses income and social inequality in America’s Black and Hispanic communities. The proceeds of this bond - issued by Bank of America - will mainly be used to finance projects for affordable housing and socio-economic advancement.
The ‘Equality Progress Sustainability Bond’ is unique in that it explicitly targets social and economic disparities in underserved minority communities, says Joshua Linder, Credit Analyst Fixed Income at APG Asset Management. “America’s Black and Hispanic communities have been especially hard hit by the Covid-19 crisis. As a result, these disparities have widened. We find the use-of-proceeds impactful as it addresses a number of specific and clearly identified inequalities.”
One such disparity is home ownership, which is widely considered important to social stability and the accumulation of wealth. Research indicates that only 47% of Black families and 51% of Hispanic families own their homes, compared to 76% of White families. Home buyers in these communities also tend to get less favorable mortgage provisions. The proceeds of the bond will be used, among other things, to expand mortgage lending for single or multi-family housing.
Other uses of the $2 billion proceeds include loans and investments in affordable housing, financing for medical professionals to expand medical services in areas with large Black and/or Hispanic populations, and investments in Black and Hispanic owned or operated businesses. As a sustainable bond, the investment finances a mix of social and green projects, including renewable energy and clean transportation projects.
Leading green bond investor
“This was a good investment opportunity because we find Bank of America attractive from a credit perspective and have been engaging with them for a long time on green, social and sustainable bond issuance,” says Joshua. The sustainable bond has outperformed both comparable Bank of America bonds and its peer group since it was issued.
Sustainable bonds are issued by companies and (semi-)government agencies for the funding of a mix of green and social projects. APG is one of the world’s largest investors in green, social and sustainable (mixed) bonds; at the end of 2019, we had invested € 9 billion in such bonds on behalf of our pension fund clients ABP, bpfBOUW, SPW and PPF APG. To encourage development of this market, APG has published the Guidelines for Green, Social and Sustainable Bonds, which outline our expectations for companies, institutions and governments issuing such bonds.