There has been an expansion in the space of the types of companies and organizations raising impact debt. It now includes financial institutions, Community Development Financial Institutions (CDFIs), foundations, and banks, to name a few. There are a variety of reasons for this that can include but are not limited to matching investor demand, meeting regulatory requirements, demonstrating commitment to sustainability, and funding projects that fit an environmental and/or social need. There are also financial aspects for issuing impact debt that can include market conditions, cost of capital, and economic cycles.
For companies/organizations issuing debt, there are various ways to measure and monitor impact outcomes. Labeled sustainable bonds typically adhere to recognized standards and have gone through a certification process. The International Capital Markets Association (ICMA), the Climate Bonds Initiatives (CBI), the European Green Bond Standards (EUGBS) and the ASEAN green, social and sustainability bond standards are among some providing guidance.
Some companies will measure and monitor impact outcomes against their own internal impact and/or sustainability policies and report on their outcomes quarterly or annually. This can be in the form of impact reports, sustainability reports, or specific updates as needed on the bonds’ use of proceeds and the company’s progress toward meeting its goals.
The report also provides details on bondholder stewardship, which in this context extends beyond the act of financing to encompass the responsibility of ensuring resources are managed prudently and risks are transparently addressed. By setting expectations around governance, disclosure, and financial discipline, bondholders create accountability for their investments and the broader market.
At CCM, as stewards of our clients’ capital, we look to actively engage with issuers to encourage and support practices that foster sustainable, positive, long-term societal outcomes. While stewardship has traditionally been linked to equities; we believe that delivering lasting value for clients requires applying effective stewardship across all asset classes.
The report is available for download on CCM’s website here.
Disclosures
Community Capital Management, LLC (“CCM”) is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The verbal and written communications of an investment adviser provide you with information you need to determine whether to hire or retain the adviser. Past performance is not indicative of future results. Any performance information, case studies, examples, or securities identified and described herein are for illustrative purposes only and do not guarantee future results or outcomes.
Bonds are subject to interest rate risk and will decline in value as interest rates rise. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Investments selected based on impact criteria may result in a portfolio that is less diversified and may be subject to greater volatility or risk. There is no guarantee that any impact objectives will be achieved, and measurement of impact may be subject to limitations or inaccuracies. An investment strategy that incorporates impact criteria may result in lower or higher returns than an investment strategy that does not include such criteria.
Opinions, estimates, forecasts, and statements of market trends are based on current market conditions and are subject to change without notice. CCM does not make any express or implied representation or warranty as to the accuracy or completeness of the information contained herein and shall have no liability to the recipient or its representatives relating to or arising from the use of the information contained herein or any omissions therefrom. For a full list of relevant disclosures, please visit https://www.ccminvests.com/regulatory-disclosures.