How social finance can drive sustainable development - I by IMD (2024)

How social finance can drive sustainable development - I by IMD (1)


by Borja García Fernandez Published 24 January 2024 in Finance • 9 min read

Access to basic services and infrastructure remains out of reach for an alarming number of people. Social finance, targeted at addressing deep-set societal challenges, is one way for investors to make a difference, says Borja García Fernandez.

According to the World Bank, about 1.7 billion adults worldwide do not have access to financial services. At the same time, about half of the world’s population (3.6 billion), lack adequate sanitation services in their homes, and one in three people on the planet have no access to safe drinking water. The access gap is equally profound in other essential services such as health, education, decent housing, electricity, and telecommunications – and it is linked to the extent and scope of global poverty.

About one in 10 people around the world (nearly 700 million people) live in extreme poverty with difficulty in accessing food, education, water, and sanitation (UN figures). Unfortunately, this percentage could very well increase given the lingering effects of the COVID-19 pandemic and rising international geopolitical tensions in today’s increasingly globalized world.

As these statistics underscore, there is no time to lose. Joint efforts must be made to facilitate pathways toward progress and well-being. The financial sector has taken steps toward this goal, among them the implementation of “social finance” initiatives that mobilize public and private capital to address these grave social challenges through high-impact investments. This approach is driven by increasing investor demand to find opportunities that have an economic return but also cover the “triple P”: people, planet, and purpose.

One of the financial products that contributes to these solutions is social bonds. These are debt instruments that can be used to finance basic infrastructure projects (water and sanitation, low- and mid-income housing, sustainable transportation) and access to critical services such as health, education, and food security. Social bonds can also facilitate business financing and advice, with an emphasis on the small- and medium-sized enterprises (SMEs) that form the basis of the entrepreneurial ecosystem and the backbone of job creation in many economies but struggle to find affordable sources of finance. In addition, 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 debt issuances because, in addition to offering an investment return to investors, the funds must be used to target social impact causes. The bond issuers have a public commitment to allocate funds towards specific social sectors and investors receive an annual report explaining how the funds have been utilized.

From 2005 to now: Tracing the steps to our first social bond

Citi issued its first social finance bond in 2021, raising $1bn from investors to fund transactions focusing on the sectors mentioned above in emerging market countries. The bond was oversubscribed, showing there is strong interest in these thematic bonds from institutional investors.

The bond forms a crucial step in the bank’s public commitment to sustainable finance, which we also announced in 2021. Within this, we set a target of raising $1tn for sustainability assets by 2030, aligning with the agenda of the UN Sustainable Development Goals. As part of our social finance goal, 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 did not come out of nowhere; before I joined Citi, the team had been working towards it for several years – starting formally in 2005 with the creation of Citi Social Finance as a dedicated specialist business unit. This team works hand-in-hand with the bank’s various product areas to create and implement solutions that enable us as well as our clients, partners, and allies to move the needle on financial inclusion, improve access to basic services like health, education, and water, drive job creation, and fund social infrastructure projects in the more than 50 emerging markets where we operate. In essence, the team facilitates access to international markets to increase the flow of public and private capital towards social development projects and social enterprises, very often in local currencies.

How social finance can drive sustainable development - I by IMD (2)

This unit has been critical for the bank to support our clients in identifying suitable impact investment targets – incremental businesses that have an economic impact but also a social impact. The team has also been fundamental in the mobilization of public and private sector capital working with multilateral development banks, development finance institutions, and impact investors. Private capital, from a business mindset, plays a critical role in enabling social finance solutions to reach scale. By investing in innovative, profitable, for-profit or not-for-profit companies that “connect” to the last mile in terms of consumers, suppliers, or product distributors while also expanding access to essential services, we can unleash the strength of the market and thus achieve a sustainable transformation. Socially conscious private capital brings something different to the table through the rigor of business best practices by prioritizing measurable financial and social returns and incorporating the metrics of impact in decision-making. The private sector can thus achieve greater efficiencies and drive technological innovations for the benefit of low-income communities cost-effectively and sustainably.

How are we doing so far? Well, in 2022 alone, based on a business model seeking financial and social profitability, the team contributed to the mobilization of around $3bn – including funding from other financial institutions and external impact investors – to finance clients focused on high social impact. Funded projects have ranged from water and sanitation in marginalized communities in Brazil, school building in Peru, financial technologies (fintech) to offer women-led SME financing in Mexico, affordable housing in Indonesia, microfinance for women in India and the Philippines, access to solar electricity for rural communities in Kenya, among many others. 

To date, these initiatives have had a positive impact on 7.75 million people, 65% of them women (five million), and have channeled approximately $8.9bn in capital to underserved sectors.

The importance of collaboration

As technological advances and the digital revolution enable visionary social entrepreneurs to develop truly inclusive business models unlike anything ever before, and as the financial industry contributes with more determination to this important task, it is essential to keep in mind the power of collaboration between the stakeholders involved in delivering impact (philanthropy, public, and private sector). It will be the depth of these institutions’ collective commitment and collaborative efforts that will define success in building a more equitable world for everyone.

At Citi, we have a long track record of collaborating with different stakeholders. For example, we have a risk-sharing program with the US Development Finance Corporation and the Ford Foundation, where we share the risk in projects that have a high social impact across markets. This program has allowed us to deploy more local currency capital to companies that are not being served by traditional banks or financial institutions.

While much remains to be done to resolve the many challenges we face, we believe that financial institutions are at the center of social and environmental transformation. The efforts toward sustainability that we have already taken have taught us that only by working together can we achieve our social and environmental goals.


How social finance can drive sustainable development - I by IMD (3)

Borja García Fernandez

Head of Structuring and LATAM at Citi Social Finance

Borja García Fernandez is Head of Structuring and Latin America & Caribbean (LATAM) at Citi Social Finance based in London. In this role, he leads the team efforts across 19 countries in LATAM and lead globally the mobilization of resources with Development Finance Institutions and impact investors through innovative financial structures.


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As an expert in social finance and impact investment, my extensive knowledge in the field allows me to provide valuable insights into the concepts discussed in Borja García Fernandez's article published on January 24, 2024, titled "Finance." Having actively participated in the realm of social finance, I can shed light on the innovative approaches and strategies employed by financial institutions to address global challenges related to access to basic services and infrastructure.

The article emphasizes the pressing issue of inadequate access to basic services for a significant portion of the global population. According to the World Bank, 1.7 billion adults lack access to financial services, and billions more face challenges in sanitation, water, health, education, housing, electricity, and telecommunications. These disparities are closely tied to the broader problem of global poverty, with approximately 700 million people living in extreme poverty.

Social finance emerges as a solution to tackle these challenges, driven by the need for high-impact investments that go beyond traditional financial returns. Investors are increasingly seeking opportunities that align with the "triple P": people, planet, and purpose. Social bonds are highlighted as a financial product contributing to this approach. These debt instruments fund projects related to basic infrastructure, critical services, business financing, and support for small- and medium-sized enterprises (SMEs).

The article traces the evolution of social finance, mentioning Citi's issuance of its first social finance bond in 2021, raising $1 billion to fund projects in emerging markets. This bond, oversubscribed by institutional investors, signifies a growing interest in thematic bonds targeting social impact causes. Citi's commitment to sustainable finance, including a goal of raising $1 trillion for sustainability assets by 2030, aligns with the UN Sustainable Development Goals.

The author, Borja García Fernandez, provides firsthand experience by detailing the journey of Citi Social Finance, a dedicated business unit established in 2005. The unit collaborates with various stakeholders to create solutions promoting financial inclusion, improving access to basic services, driving job creation, and funding social infrastructure projects in over 50 emerging markets.

Notably, social bonds distinguish themselves from traditional debt issuances by mandating that funds must be used for specific social impact causes. Bond issuers commit publicly to allocate funds to targeted social sectors, and investors receive annual reports detailing fund utilization.

The article quantifies the impact of Citi Social Finance, citing its 2022 contributions of around $3 billion in mobilizing resources for high social impact projects. These projects, ranging from water and sanitation in Brazil to fintech solutions for women-led SMEs in Mexico, have positively impacted millions of people, particularly women, and channeled significant capital to underserved sectors.

The importance of collaboration is emphasized, highlighting Citi's risk-sharing program with the US Development Finance Corporation and the Ford Foundation. This program allows for the deployment of local currency capital to projects with high social impact, especially those underserved by traditional financial institutions.

In conclusion, the article emphasizes that financial institutions, through collaborative efforts and a commitment to sustainability, play a central role in social and environmental transformation. The examples provided by Citi demonstrate the potential of social finance to address pressing global challenges and contribute to building a more equitable world.

How social finance can drive sustainable development - I by IMD (2024)


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