May 27, 2024

AfDB Launches $2 Billion Social Global Benchmark Under New Sustainable Bond Framework

 

By: Shabach Bako

 

In a strategic move aligning with the robust reopening of primary markets in January 2024, the African Development Bank (AfDB) announced the launch and pricing of a $2 billion three-year Social Global Benchmark. This marks AfDB’s first social bond issued under its new sustainable bond framework established in September 2023. The bond, due February 25, 2027, consolidates and enhances the existing green and social bond program, facilitating the issuance of green bonds, social bonds, and sustainability bonds.

 

The bank’s funding strategy emphasizes issuing large liquid benchmark transactions, and this transaction is a significant highlight amid a dynamic week in the sub-Saharan Africa markets. The region witnessed the launch of eight benchmarks totaling $17.25 billion within two days. The three-year social benchmark adds another on-the-run reference to the bank’s portfolio.

 

The issuance received robust support from the global investor community, with an order book exceeding $3.5 billion. High-quality investors, including central banks, official institutions, and bank treasuries, constituted 78% of the book. The social label attracted interest from Environment, Social, and Governance (ESG) investors, representing 38% of participants in the book.

 

The Indications of Interest (IoIs) reached $2.1 billion during the overnight session before books officially opened on Thursday, January 18, at 08:00 London time. The order book continued to grow, reaching $3.6 billion by 10:50 London time. This allowed the spread to tighten by 2bps, set at SOFR mid-swaps plus 31bps. Books closed at 13:00 London time, and the high-quality order book, in excess of $3.5 billion, enabled the launch of the transaction with a size of $2 billion. The trade officially priced at 15:18 London time with a reoffer yield of 4.221%, equivalent to a spread of 10.3bps vs UST 4 percent Jan-27 – the tightest print vs UST in the USD SSA primary market so far in 2024.

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