The heightened business focus on sustainability and responsible business practices has driven a  dramatic transformation in debt markets during the last decade, reflecting new environmental and social needs. 

In episode 3 of Boardroom.Media’s new show, Pay It Forward, The Responsible Investment Series, Stephen Fitzgerald, Managing Partner at Affirmative IM outlines how the bond market is driving impact. 


Fitzgerald talks to the term “impact bonds” and breaks them down into three distinct categories: green bonds, social bonds and sustainability bonds. 

“A green bond, the proceeds are used to fund projects or make loans that have the benefit of either helping the world to adapt to more volatile weather or to mitigate climate change through reducing carbon emissions.”

Fitzgerald suggests that loans that fund solar plants and renewable energy would be an example of a green bond as its purpose is environmental in nature. Talking to social bonds next, he tells us:

A social bond, very similar, except the purpose is a social outcome that could be microfinance lending to women-owned businesses in North Africa. So there’s a social element to it.”

Both green bonds and social bonds fall under the newest impact category being sustainability bonds, suggesting that the projects have an environmental or a social purpose. 

The application of the bond’s funds to an environmental or social project is the only distinction between impact bonds and their corporate and government counterparts. Financially speaking, the impact bond market is no different to the broader debt market, trading at the same yields, and bringing financial returns that are on par to non-impact alternatives. 

“From a financial perspective, they performed in line with other bond markets. For that reason, when we manage portfolios, we manage against broad market indices. We’re not generally managing against green bond carve outs.”

Looking to the future of the impact bond market, Fitzgerald’s vision is that it “becomes mainstream”.

“We’re seeing the market grow, become more diverse and actually more opportunities for both adding impact and more opportunities for adding financial return as well.”

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