Dive Brief:

• Worldwide issuance of bonds linked to the economic empowerment of women or to increasing female representation on company boards will probably grow beyond the current $9.2 billion total and prove “credit positive” for issuers, Moody’s Investors Service said in a report.

• “The investments in gender diversity and structural changes that are promoted by gender bonds can improve the credit quality of private and public issuers by, among other things, raising women's paid employment rates and improving overall workforce participation and ownership rates,” Moody’s said, noting “a link between gender-related metrics and credit risk indicators.”

• “Narrowing gender gaps can have macroeconomic benefits, while board-level gender diversity appears to correlate with higher credit ratings for corporate issuers," it found.

Dive Insight:

Issuance of various types of so-called sustainable bonds will likely hit a record $650 billion in 2021, representing 8% to 10% of total global bond sales, Moody’s said. Within that broad category of debt, sales of gender and other “social bonds” will probably increase this year to $150 billion from $141 billion in 2020.

Policymakers in the U.S., eurozone and other regions will likely spur growth in the market for sustainable debt this year as they focus on mitigating climate change and tying economic recovery plans with sustainable development goals, Moody’s said. 

Several factors, including rising demand from a diversifying pool of investors, are fueling growth in social bonds and gender-linked bonds and loans.

The International Capital Markets Association in June updated its Social Bond Principles to include women and/or sexual and gender minorities among its target populations. Also, the pandemic has increased gender inequality by widening pay gaps and reducing women’s workforce participation.

Gender bonds primarily focus on expanding women’s economic participation and promoting equitable pay, with some funding female-owned enterprises or targeting higher board or executive-level representation, Moody’s said.

Gender bond issuance “will be credit positive over the long term for corporate issuers and national and regional governments because expanded opportunities for women can reduce operational and reputational risk and benefit economic growth and social cohesion,” according to Moody’s.

Carlyle Group in February announced it had secured a $4.1 billion revolving line of credit with the price of debt tied to the firm’s previously announced goal of achieving a 30% diversity level on the boards of Carlyle-controlled companies.

During the past three years “the average earnings growth of Carlyle portfolio companies with two or more diverse board members has been approximately 12% greater per year than companies that lack diversity, underscoring the correlation of board diversity with strong financial decisions and performance,” Carlyle said.

Although the gender bond market is relatively small, “there is good reason to believe it will continue to expand rapidly,” Moody’s said. “Greater acknowledgement by investors will induce demand for more bonds and draw more capital from a more diverse set of investors.”