FirstRand's first social bond proceeds to support FNB lending to SMMEs, housing customers

The proceeds of financial services provider FirstRand Bank's inaugural social bond will be allocated to fund financial services firm FNB’s lending to small, medium-sized and microenterprises (SMMEs) and affordable housing customers.

The proceeds will also be used for financial management firm Rand Merchant Bank's (RMB’s) information and communications technology projects, which focus on delivering connectivity in previously underserved or disadvantaged areas.

RMB acted as sole lead manager and sustainability coordinator for the inaugural social bond issuance that raised R2.59-billion across three-, five- and seven-year maturities.

“In an economy like South Africa where income inequalities persist, social instruments become a crucial enabler in socioeconomic growth to ensure the allocation of capital to important social investments,” says RMB Sustainable Finance and Environment, Social and Governance Advisory head Nigel Beck.

This inaugural social bond issuance, which follows previous green and sustainable bonds by FirstRand Bank, is an important milestone that reflects the importance of allocating capital to social assets that deliver positive societal value for underserved societies, he adds.

Social bond issuances, by their very nature and intent, need to be guided by local market nuances and specifically need to recognise the socioeconomic imperatives of the country.

This is the first issuance under FirstRand’s new sustainable finance framework, which RMB supported in its capacity as sustainability adviser.

The process of updating the framework gave FirstRand Bank further opportunity to consider how best to make an impact within South Africa’s local context, while aligning with international principles and best practice, Beck says.

“It is very encouraging that our inaugural social bond was oversubscribed. This is a positive indicator of investor appetite for high-impact, social instruments in South Africa,” notes FirstRand Group treasurer Bhulesh Singh.