WLB Asset Pte Ltd is to issue US$8million of 5.65% four-year women’s livelihood bonds. If listed as intended, it will be the world's first social sustainability bond listed on a stock exchange.

The primary objective of the bond is to increase credit access, improve market linkages and enhance the provision of goods and services to more than 385,000 women in Cambodia, the Philippines and Vietnam. Hogan Lovells advised the placement agents, DBS and ANZ, and the trustee, BNY Mellon, and also worked closely with the Impact Investment Exchange (IIX).

The women's livelihood bonds work by pooling the financing needs of a group of social impact enterprises whose activities benefit women, into a special purpose vehicle. The vehicle on-lends the proceeds from the bonds to those enterprises and charges them interest. The interest payments fund the coupon payments to the bondholders.

If any of the enterprises default on the relevant loan, the risk of payment default under the bonds by the issuer is mitigated by a US$500,000 subordinated loan from the Impact Investment Exchange to the issuer, and a guarantee from the US Agency for International Development in favour of the issuer of up to 50% of the principal amount of the underlying loans.

“The infrastructure for social capital markets is now taking off,” says Impact Investment Exchange founder Durreen Shahnaz. “This transaction brings us one step closer to a day when our financial markets consider social and environmental impact on an equal footing with financial returns.”

Hogan Lovells Lee & Lee partner Andy Ferris called the process of working on the deal “interesting, challenging and rewarding.”

“As the bond issuer relies on the loan repayments to pay out under the bonds, the structure needs to address what might happen if, for example, a delay occurs in receiving those payments,” says Ferris. “The parties were keen to ensure that such events wouldn't unnecessarily collapse the structure, hence the manner in which the bonds were drafted.”

“It's important that this one is done well, the coupons are paid, the principal is repaid,” says DBS head of fixed income, Clifford Lee. “That will lend confidence to more being done, especially in Asia where this concept of a social impact bond is still quite new. The intent is to try to make this a cookie-cutter in as many areas as possible for it to be replicated.”