The Practical Application of Social Bonds in the Real Estate Sector

Abstract: During the last years a new trend has been recognized where real estate owners and institutesissue social bonds in the bond exchange market in Sweden. This together with the stronggrowth of green bonds gives the issuer better opportunities to develop sustainable projects.This study examinate the practical application of social bonds in the real estate sector. Thecriteria used in social projects vary by issuer, and one example is provided by the Swedishissuer Kommuninvest, where their main requirements to be qualified as a social project aresocial issues regarding 1. housing and living environment, 2. safety and availability 3. sports,education, culture and health. Kommuninvest is using a secondary opinion to ensuretrustworthiness of the bonds. However, the goals of the projects for actors issuing socialbonds can to some extent be unclear and especially hard to evaluate. A better measurability ofsocial bonds would make it easier for actors in the market to clarify the potential of theprojects and increase the interest for social bonds from investors. The findings of this studyshows that criteria, motivations and practice of social bonds differs between actors in themarket, and that the differences are particularly pronounced between investors and issuers.The study also shows that there is currently limited development of a common social bondframework, although a social taxonomy is underway. According to the findings, the maincornerstone for issuing social bonds in Sweden is the Social Bond Principles produced byICMA. In addition, the Sustainable Development goals by the United Nations are commongoals the actors connect their social projects to. Instead of using theoretical methods forevaluation of social projects, actors use different statistics such as crime rate, safety level andrelocation statistics. According to the actors interviewed, the social bond market is still newand will go through changes in policies and standards in the upcoming years.