EU to sell €100bn social bonds to start recovery fund

The European Commission said on Wednesday its SURE unemployment scheme, one of the coronavirus recovery plans for EU member states, would be financed in full by social bonds.

The funding of the SURE scheme is viewed as a test run for the much larger European Union recovery fund.

“Today, the European Commission announces that it will issue its forthcoming EU SURE bonds of up to €100 billion as social bonds,” said the Commission in a statement.

“To that end, the Commission has adopted an independently evaluated Social Bond Framework.

“This Framework is meant to provide investors in these bonds with confidence that the funds mobilised will serve a truly social objective.”

Commissioner Johannes Hahn, in charge of budget and administration, said: “The decision to issue the EU SURE bonds as social bonds will be a game changer for the global social bonds market.

“At the same time, it is a clear demonstration of the EU’s long-term commitment to sustainable financing.

“I am very excited about today’s announcement and looking forward to the forthcoming EU SURE issuance in the very near future.”

European Commission President Ursula von der Leyen said: “We are not only investing billions of euros to save jobs in Europe and reduce the social impact of the coronavirus pandemic, but we are also doing it by issuing social bonds.

“This will give investors the chance to contribute to our efforts and up to €100 billion will help keep people in jobs in our Member States.”

The funds raised will be transferred to the beneficiary Member States in the form of loans to help them cover the costs directly related to the financing of national short-time work schemes and similar measures as a response to the pandemic.

By preparing and presenting a Social Bond Framework, the Commission seeks to appeal to investors who want to put their funds to work for Environmental, Social and Corporate governance (ESG) purposes.

The Commission’s Social Bond Framework has been established in full compliance with the Social Bond Principles (SBP) published by the International Capital Market Association (ICMA).

It has been independently evaluated by an external evaluator, Sustainalytics.

The first transaction will happen in the second half of October.