Union Bank of the Philippines to Issue First Social Bond with Investment from IFC


Tens of thousands of jobs are expected to be created over the next seven years through a new social bond to be issued by one of the Philippines’ leading banks to help smaller businesses recover from the impacts of COVID-19. 

IFC is investing US$150 million in a seven-year social bond to be issued by Union Bank of the Philippines (UnionBank, PSE: UBP), the country’s seventh-largest private-sector bank. The bond, which will be issued under UnionBank’s new sustainable finance framework, will be the first social bond by the bank and its longest-term USD-denominated bond to date. It also marks only the second social bond of its kind in the Philippines. 

Proceeds from the bond are expected to finance over 2,000 loans to micro, small and medium-sized enterprises (MSMEs), which have been disproportionately impacted by COVID-19. IFC’s investment will also help UnionBank boost financing for MSMEs through its supply chain financing platform, enabled using digital technologies. 

“Our goal in issuing this bond is to support the recovery of MSMEs from the COVID-19 pandemic” said Jose Emmanuel Hilado, Chief Financial Officer of UnionBank. “We are confident that we can achieve this through the use of IFC’s long-term funding and by leveraging our supply chain financial platform. It could not have come at a better time, as this market segment has been hit particularly hard by the current crisis.” 

In the Philippines, MSMEs accounted for over 90 percent of businesses and over 60 percent of jobs pre-COVID-19, but MSME loans only accounted for 6 percent of total bank loans in the country1. This makes increasing access to MSME financing critical to fostering a resilient and inclusive recovery. 

“In the wake of the COVID-19 crisis, the use of social bonds to generate financing to meet the needs of vulnerable underserved people, including small businesses, will be critical to helping spur the recovery,” said Alfonso Garcia Mora, Vice President, Asia and Pacific at IFC, who took part in the signing ceremony for the investment. “This landmark deal marks IFC’s first COVID-19 response social bond investment in Asia and will help create jobs, strengthen and deepen the country’s capital markets, and contribute to the development of a more resilient, efficient and inclusive financial sector.” 

With social bonds targeting projects that aim to achieve positive social outcomes, the issuance can also pave the way to open the social bond market in the Philippines, replicating IFC’s success opening the market for green bonds in the country and deepening capital markets for thematic bonds. 

The bond is aligned with International Capital Markets Association (ICMA) social bond principles and the ASEAN Social Bond Standards, as confirmed by a second-party opinion provided by ESG research and ratings company Sustainalytics. 

As of the end of FY 2020, IFC had issued 53 social bonds in public and private markets in 11 different currencies. Since 2017, IFC social bonds have supported 153 eligible projects totaling $4.3 billion, reaching 2.6 million farmers, feeding three million people, and treating 1.6 million malnourished children. IFC more than doubled its issuances of social bonds in FY20 amid COVID-19.