By: Jorge Rubio Nava | Business Director at Citi Inclusive Finance | March 24th, 2015

The Inter-American Development Bank (IADB) is a pivotal client for Citi, and we have had a long history of partnership together.  Beginning in 2013, we began to discuss with IADB how we could showcase their exceptional work promoting social equity in Latin America.  In particular, we knew that if the offering focused on educating investors about the IADB’s work in building human capital, then existing investors and new investors would enthusiastically participate.

Last September, IADB issued a $500 million four-year Education, Youth and Employment (EYE) bond, structured by Citi.  This new investment is the first of its kind: a “Theme Bond” whose proceeds will finance IDB’s work in early childhood care, primary and secondary education, and employment projects that improve the transition from school to work. The bond aligns impact investors’ portfolios with IDB’s mission to combat poverty in Latin America and Caribbean and perhaps more importantly, establishes a product space for institutional investors to fund specific double-bottom line sectors, without sacrificing a market return.  A second lasting impact of this issuance was to bring to IADB new investors, many of which do not typically invest in supranational bonds of any kind.  

“The EYE bond is an innovative instrument designed to bring additional resources and awareness to bear on three key priorities for Latin America and the Caribbean,” said IADB President Luis Alberto Moreno. “The projects that will benefit from these investments will contribute to improving the quality of children’s education, increasing productivity and enhancing the skills of young people entering the job market.”

This Theme Bond also improves funding for IDB’s human capital focused development projects and enables them to get in front of institutional and impact-oriented investors with a fresh new approach towards fundraising in the public capital markets.  My colleague Philip Brown, Head of Public Sector Fixed Income Origination says it best, “The IDB EYE bond was structured and issued in response to demand for large and liquid SRI complaint fixed income products from investors across the globe.  Investor interest is growing fast and this bond provides a great platform to highlight the strength and scale of IDBs expertise in this area.” 

What do you think about Theme bonds? What doors could it open for how the investment industry can effect positive social change? What other “Theme Bonds” could raise funds for development agencies or corporates?

Please tell us in the comments below.

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