AfDB raises $2bn in social bond to drive sustainable projects

The African Development Bank (AfDB) has announced the successful launch of a $2 billion social benchmark bond.

The AfDB announced the five-year bond in a statement on Thursday.

A social benchmark bond is a type of bond issued specifically to raise funds for social or environmental purposes, such as affordable housing, education, renewable energy, and sustainable infrastructure.

According to the bank, the offer’s pricing date was September 10, while its settlement date is September 18.

The bond’s announcement, which coincided with the 60th anniversary of the AfDB and issued under its sustainable bond framework, is expected to mature on September 18 2029.

“The bond was launched on Tuesday, 10 September, and pays a coupon of 3.500% with a re-offer yield of 3.574% and a reoffer price of 99.664%,” the statement reads.

“The new 5-year USD transaction, issued in a social bond format under the Bank’s Sustainable Bond framework, marks AfDB’s second USD Global Benchmark in 2024 following the 3-year USD 2 billion social benchmark transaction issued in January.

“The new transaction brings an on-the-run reference point in the 5-year part of the USD curve, extending AfDB’s outstanding curve, and demonstrating the issuer’s commitment to maintain liquid lines at key benchmark maturities.

“With the final order book closing in excess of USD 3.7 billion (including USD 150 million of Joint Lead Managers (JLMs) interest), and 66 investors participating, the success of this 5-year transaction is a clear vote of confidence from investors in AfDB’s AAA credit.

“The strong participation from ESG investors representing 25% of the final order book also highlights investors’ confidence in the Bank’s Sustainable Bond Framework and development mandate.”

The AfDB said its mandate for a new five-year dollar social benchmark was announced on September 9 at 09:40 UKT, while initial pricing thoughts (IPTs) were “released thereafter at 12:53 UKT at secured overnight financing rate (SOFR) mid swaps+ 42 basis points (bps) area”.

Mid-swap is the price calculated as the midpoint between the bid and offer prices (buy and sell prices) on currency or interest rate transactions (swaps).

According to the development bank, investor demand was strong from the outset as indications of interest (IoIs) from its high-quality investor base accumulated at a rapid pace, exceeding $2.5 billion (including $150 million JLM interest) overnight.

Analysing the investor geographical distribution statistics, AfDB said the Americas have (47 percent), followed by Europe, Middle East and Africa (EMEA) (32 percent) and Asia (21 percent).

In terms of investor type, the lender said the high-quality order book was predominantly allocated to central banks and official institutions (56 percent), bank treasuries (29 percent) and fund, asset managers and hedge funds (15 percent).