Charity Notes: Empowering Investors for the Greater Good

21/04/2021

Interest in Environmental, Social and Governance (ESG) investing is rising in Asia, illustrated by the recent launch of Charity Notes as another pioneering step in the development of sustainable and positive investment solutions for investors in the region.

Investors in Asia are fast embracing innovative products that support sustainable development goals without sacrificing competitive returns. They are also consistent buyers of structured products that deliver benefits like yield enhancement and downside protection. Late last year, Societe Generale brought these two trends together with its issuance of Charity Notes for the first time in Asia. These products were initially launched in Japan and Hong Kong, building on their success and popularity in Europe.

An innovative investment solution raising the CSR footprint of distributors and investors

Societe Generale’s charity notes are a true financial innovation that makes this type of investment attractive: investors buy the structured notes as usual without sacrificing either the premium or any of the features  and the Bank, as the product issuer, sponsors a charitable organisation, CARE, for a percentage of the amount subscribed. The product offers investors a degree of downside protection for the principal they have invested, while allowing them to contribute to the social good.

In Japan, this is the first time that investment products with a charitable sponsorship component are fully accessible to local retail investors in Japan. The products have also been widely distributed to local corporates through private placements. Since the debut, local appetites for the products have been very strong thanks to their simplicity and the societal benefit they ensue, leading to an issuance of over EUR 100 million in just six months.

The charity notes were also well-pursued by a client based in Hong Kong – a global private bank with presence in Hong Kong and Singapore – as part of its new set of sustainable and positive investment offerings to its end clients, the high-net-worth- and ultra-high-net-worth individuals. With an ambition to contribute to its global ESG agenda, the client viewed charity notes as a good starting point for building awareness among its affluent clients in the region. While there are already other similar offerings in those markets, the flexibility of the Bank's charity notes in terms of structure, such as shorter tenor, proved to be a better match with investor appetites. 

Growing appetite for ESG solutions

Charity notes are Societe Generale’s second sustainable and positive investment solution for the Asian retail market. In 2019, Societe Generale launched Positive Impact Notes that allow investors to support the Bank’s financing of Positive Impact projects, as defined by the United Nations Environmental Program, while sticking to their existing investment strategy. Societe Generale made a commitment to hold loans to those qualified projects on its balance sheet that were equivalent to 100% of the note’s proceeds. The pool of projects that the financing (raised from the notes) supported was sourced globally, but the note issuance was in Asia.

Societe Generale foresees that investors’ appetite for ESG and Positive Impact financial products will continue to increase, catalysing much greater issuance of similar products in the future. ESG investing has become more established in Asia Pacific and there is now a variety of products that offer strong track records and have proven to be resilient in challenging markets. This brings confidence to investors who may be concerned about the impact of ESG considerations on investment performance. 

Generational changes, with millennials’ greater support for environmental causes influencing society as a whole and the investment community, is another contributing factor. The covid-19 pandemic has further accelerated investors’ focus on making a positive societal impact. 

Data reflect the strength of momentum for ESG investing and the scale of the opportunity. In 2020, governments, corporations and other groups raised a record US$490 bn by selling green, social and sustainability bonds, while US$347 billion – a record high – flowed into ESG funds1.  According to Bloomberg, Global ESG assets could exceed $53 trillion by 2025, which would be more than a third of the $140.5 trillion of total assets under management2.  

A pioneering ESG solution house

Societe Generale has deep and broad experience in offering ESG solutions to financial market participants. With a top-ranked ESG Research team, performing index solutions and a wide array of sustainable and positive impact product mix ranging from the most vanilla to the fully customised proposal, the Bank is committed to delivering solutions that aptly fit into the diverse ESG and SRI3 strategies of its clients. Based in part on the successful launch of Positive Impact Notes, Asia Risk named Societe Generale “ESG Provider of the Year” in 2020.

Since the beginning of 2021, the Bank has been progressing its plan to accelerate the integration of Sustainable and Positive Impact Finance and ESG criteria across all areas of its market activities. To facilitate the ambition, it has earlier launched the #MarketswithImpact programme – an academy to get its market activity experts even better equipped to brace for the exciting and promising journey ahead.


For more information about Societe Generale’s ESG offerings, please visit the SG Sustainable & Positive Impact Finance website.
 

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[1] https://www.bloomberg.com/news/articles/2021-02-10/the-490-billion-boom-in-esg-shows-no-signs-of-slowing-green-insight
[2] https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/?tactic-page=431091
[3] Socially Responsible Investing, a sub-set of ESG investing