The African Development Bank (AfDB) made a significant stride in sustainable financing on Monday as it announced the launch and pricing of a $2 billion three-year Social Global Benchmark. This marks the bank’s inaugural social bond under its recently established sustainable bond framework introduced in September 2023.
Scheduled to mature on February 25, 2027, the bond represents a strategic consolidation and enhancement of AfDB’s existing green and social bond programme. This initiative facilitates the issuance of green bonds, social bonds, and sustainability bonds, reinforcing the bank’s commitment to environmentally and socially responsible investments.
This three-year social benchmark is AfDB’s first global benchmark of the year, aligning strategically with the vibrant reopening of primary markets in January 2024. The issuance became a standout moment in a dynamic week for sub-Saharan Africa markets, witnessing the launch of eight benchmarks totaling $17.25 billion within a span of two days.
The bank’s funding strategy involves issuing large liquid benchmark transactions, and the new social bond adds another on-the-run reference in the three-year maturity category.
According to AfDB, the issuance received robust support from the global investor community, amassing an order book in excess of $3.5 billion. Notably, central banks, official institutions, and bank treasuries comprised 78% of the book, demonstrating broad-based investor interest.
The distribution of the bond’s social label saw strong interest from Environment, Social and Governance (ESG) investors, constituting 38% of participants in the book. The deal attracted a total of 76 orders, showcasing diversified interest across geographies and investor profiles.
The journey to the successful launch saw good investor demand during the overnight session, with Indications of Interest (IoIs) reaching $2.1 billion by the time books officially opened on Thursday, January 18, at 08:00 London time. Subsequently, investor demand grew to $3.6 billion by 10:50 London time, allowing for a tightening of the spread to SOFR mid-swaps plus 31bps.
The final order book, exceeding $3.5 billion with over 70 orders, underscored the high quality of investor interest. The transaction officially priced at 15:18 London time, featuring a reoffer yield of 4.221%, equivalent to a spread of 10.3bps vs UST 4 percent Jan-27. This stands as the tightest print vs UST in the USD SSA primary market so far in 2024.
AfDB’s successful foray into the social bond market reflects its ongoing commitment to sustainable financing and its pivotal role in advancing socially responsible investments on the global stage.