According to the World Bank, approximately 1.7 billion adults around the world lack access to financial services. At the same time, around half of the world's population (3.6 billion people) lacks adequate sanitation services in their homes, and one in three people on the planet does not have access to safe drinking water. Access disparities are equally acute in other essential services such as health care, education, adequate housing, electricity, and communications, and are associated with the extent and scope of global poverty.
Approximately one in ten people around the world (approximately 700 million people) live in extreme poverty, with difficulty accessing food, education, water and sanitation (United Nations figures). Unfortunately, given the lingering effects of the COVID-19 pandemic and the heightened international geopolitical tensions in today's increasingly globalized world, this rate is likely to increase further. there is.
As these statistics highlight, there is no time to waste. A joint effort must be made to facilitate the path to progress and happiness. The financial sector is taking steps towards this goal, including the introduction of “social finance” initiatives that mobilize public and private capital to address these serious social challenges through high-impact investments. . This approach is driven by a growing demand from investors to find opportunities that cover the “triple Ps” of people, planet and purpose, as well as financial returns.
One of the financial products that can help solve these problems is social bonds. These fund basic infrastructure projects (water and sanitation, low- and moderate-income housing, sustainable transportation) and access to critical services such as health, education, and food security. It is a debt instrument that can be used to Social bonds provide business financing with a focus on small and medium-sized enterprises (SMEs), which form the basis of entrepreneurial ecosystems and job creation in many countries but struggle to find affordable sources of finance. You can also promote and advice. . Additionally, social bonds support microfinance institutions that promote financial inclusion through savings, access to credit, gender equality and women's empowerment, poverty reduction, and inclusive economic growth.
Social bonds differ from more traditional bond issues because, in addition to providing investment returns to investors, funds must be used to target causes that impact society. Bond issuers commit to allocating funds to specific social sectors, and investors receive an annual report explaining how the funds are used.
2005 to present: Retracing the steps to the first social bonds
Citi issued its first social finance bond in 2021, raising $1 billion from investors to fund deals focused on the above sectors in emerging market countries. The bonds are oversubscribed, indicating strong institutional interest in these themed bonds.
The bond is an important step in the Bank's 2021 sustainable finance commitment. In doing so, we have set a goal of raising $1 trillion in sustainability assets by 2030, in line with the United Nations Sustainable Development Goals agenda. As part of our socio-financial goals, we intend to expand access to essential services for 15 million households, including 10 million women, within the first few years.
This first social finance bond didn't come out of nowhere. Our team had been working on this initiative for several years before I joined Citi. In 2005, we officially created Citi Social Finance as a dedicated specialist business unit. This team works across the bank's various product areas to help us, as well as our customers, partners and allies, change the direction of financial inclusion and improve access to essential services such as health, education and healthcare. We create and implement solutions that can. In the more than 50 emerging markets where we operate, we deliver water, drive job creation and finance social infrastructure projects. Essentially, this team facilitates access to international markets and increases the flow of public and private capital, often in local currency, to social development projects and social enterprises.
