International Finance Corporation ( IFC ), the private sector arm of the World Bank Group, priced on April 29 its inaugural benchmark public bond denominated in Hong Kong dollars, amounting to HK$5 billion ( US$650 million ). The transaction marks the first Hong Kong dollar-denominated social bond issued in a public format by a supranational.

The three-year offering, also labelled as a social wonton bond, was priced at par with a similar coupon and re-offer yield of 3.123%. The bond, which was settled through the Central Moneymarkets Unit, attracted a total order book of HK$6.8 billion from 21 accounts, with 98% of the paper sold in Hong Kong and 2% in the rest of Asia. By type of investors, bank treasuries were the largest buyer with 89%; asset and fund managers, and corporates, 6%; and trading and securities companies, 5%.

IFC global head of funding Flora Chao describes social bonds as an important instrument for channeling investments into essential projects in emerging markets. “The transaction underscores our commitment to broadening our funding sources and engaging with a more diversified pool of investors. It also aligns with our long-term strategy of deepening our public presence in a wide range of currencies,” she says.

The social bond was issued under an updated social bond framework, which IFC published in January. The framework received a rating of “excellent” from second opinion provider Sustainable Fitch, which confirmed the framework’s full alignment with the International Capital Market’s Social Bond Principles.

Bank of China ( Hong Kong ) Limited, HSBC, and Standard Chartered were the joint lead managers for the transaction.

David Yim, head of capital markets for Greater China and North Asia at Standard Chartered, says the milestone transaction highlights IFC’s commitment to social issues and expands its investor base into the Hong Kong dollar bond market. He notes that the bond was priced against the Hibor ( Hong Kong interbank offered rate ) mid-swap, enhancing pricing transparency and simplifying hedging for issuers.

Wang Huabin, deputy chief executive of Bank of China ( Hong Kong ), says the size of the order book and depth of high-quality orders are supported by bank treasuries and other real money investors across the Hong Kong dollar market. “The strong investor response and pricing outcome stand as a testament to IFC’s robust credit quality and market’s recognition of its social commitment,” he points out.

Adds Asif Sherani, head of public sector, debt capital markets, at HSBC: “The success of IFC’s inaugural wonton bond highlights the strength of the IFC credit and investor belief in their recently updated social bond framework. The significantly oversubscribed order books demonstrate the depth of investor demand for this transaction from a broad range of Asian investors.”

Proceeds from IFC’s social bonds fund a diverse range of social projects which include affordable basic infrastructure, such as clean drinking water, sewers, sanitation, transport, energy;  access to essential services; affordable housing; women-owned small and medium-sized businesses who lack access to finance; and companies that incorporate people at the “base of the economic pyramid” into their value chain; as well as food security.

The IFC deal followed the pioneering transaction by Asian Infrastructure Investment Bank, which in February this year printed the first bond issued in a public format by an international issuer amounting to HK$4 billion. The sustainable development bond also has a similar tenor of three years and carried a coupon of 3.847%, garnering an order book of HK$9 billion from over 25 accounts.