A new article by Borja García Fernandez explores the role of social finance in driving sustainable development. Fernandez highlights that a significant number of people lack access to basic services and infrastructure, such as financial services, sanitation, and safe drinking water. Social finance, which mobilizes public and private capital to address these challenges, can play a crucial role in closing these access gaps and promoting progress and well-being.
One example of a financial product that supports social finance initiatives is social bonds. These debt instruments can be used to finance projects that address social impact causes, such as basic infrastructure, critical services, and business financing for SMEs. Social bonds differ from traditional debt issuances because their funds must be used for targeted social impact purposes. Investors receive annual reports on how the funds have been utilized, ensuring transparency and accountability.
The article highlights the efforts of Citi in social finance, including the issuance of a social finance bond in 2021 to raise $1 billion for high-impact investments in emerging markets. Citi’s goal is to expand access to essential services for 15 million households, including 10 million women, within the first few years. The bank’s social finance unit works closely with various stakeholders, including multilateral development banks, to mobilize public and private sector capital for social development projects.
Collaboration between stakeholders is essential for achieving social and environmental transformation. Citi has demonstrated its commitment to collaboration through risk-sharing programs and partnerships with organizations like the US Development Finance Corporation and the Ford Foundation. These collaborations enable the deployment of capital to projects with high social impact that are not served by traditional banks or financial institutions.
In 2022 alone, Citi’s social finance initiatives contributed to the mobilization of around $3 billion, financing projects focused on water and sanitation, education, women-led SMEs, affordable housing, microfinance, and solar electricity access. These initiatives have positively impacted 7.75 million people, 65% of whom are women, and channeled approximately $8.9 billion in capital to underserved sectors.
In conclusion, social finance has the potential to drive sustainable development by addressing access gaps in basic services and infrastructure. Collaboration between stakeholders, including financial institutions, public sector organizations, and impact investors, is crucial for achieving social and environmental goals and building a more equitable world for all.
