Going Global with a Proven Formula

Fixed Income

How we are taking a unique and proven impact investing approach to the next level

It has been a decade since Columbia Threadneedle Investments made the pioneering move into fixed income impact investing, launching the CT UK Social Bond in 2013 – the UK’s first daily liquid social bond fund. Having followed that with the Threadneedle (Lux) European Social Bond in 2017, we are now going global with a unique and proven approach built on the principles of impact investing.

Why social?

“We believe that investment to support positive social outcomes, through the targeting of more deprived populations, serves a net benefit for society”

At Columbia Threadneedle we believe that positive societal outcomes, such as health and well-being, correlate poorly with broad economic measures such as aggregate gross domestic product (GDP); in fact we have seen that “rich” or developed countries can be among the worst for social outcomes. The reason being that aggregate wealth is not a good predictor of outcomes, with the magnitude of wealth and income gaps within countries a particular problem.

The critical predictor of social outcomes for people is
inequality. Inequality is high across the world and at risk of deteriorating further: despite income inequality between countries improving, income inequality within countries is getting worse.1 Key systemic global events continually put this vulnerability in the spotlight: the Covid-19 pandemic, the war in Ukraine and the subsequent cost-of-living crisis. The most vulnerable in society are most adversely impacted.

Therefore we believe we can do more to advance net societal benefits by targeting deprivation and inequality as opposed to hopeful improvements in aggregate economic measures. Improved outcomes for the least well-off and more marginalised in society will mean improved outcomes such as better health, greater productivity, improved standards of living and less crime, which we believe net benefit not just the cohort targeted, but all society.

Why fixed income?

“This large asset class has great potential to allocate capital for socially beneficial outcomes”

When we launched the CT UK Social Bond, we started with the belief that the bond market has a natural role to play in dealing with inequality. It has three clear advantages that make it ideal for impact investing: scale, scope and the ability for proceeds to target specific outcomes.

Bonds are a vast universe, easily the biggest asset class at more than $130 trillion in size,2 and the amount of new capital the market will raise in any one year is similarly big. For example, last year the public bond market raised $10 trillion in new capital, which is near 20x the size of the $0.5 trillion raised in new public equity. The scale owes to the broad spectrum of issuers, which includes government-related entities, supranationals, development banks, other non-profit organisations, education establishments, non-listed companies and listed companies. It is this ability to pull in both private and public capital funders that makes the bond market so well positioned to play a role in addressing social issues.

The third point about bonds is that they offer a targeted investment opportunity, which is a key point about impact. Bonds can be secured against identifiable assets, with money raised ringfenced and with an agreed specific use of proceeds. This allows us to be intentional towards the outcomes and the population set that can benefit from our allocation of capital – we can follow the money through and evidence how it will support beneficial outcomes for society.
When we launched the UK Social Bond this type of investing was new, but a focus on impact measurement was key to our approach – which remains the case. As the ESG (environmental, social and governance) labelled bond market has grown past $3.5 trillion in cumulative issuance (Figure 1), a series of guiding principles for the bond market have been established by the International Capital Markets Association (ICMA), helping to crystalise this approach. As pioneers in this area we were well placed to contribute to the development of these principles, which require issuing entities to be very clear in how they define eligible projects, and then in how they monitor and report on these – a transparency which further enhances the suitability of the bond market in this type of investing.
Figure 1: growth and breadth of the bond market
Source: Bloomberg and Columbia Threadneedle Investments as at 1 March 2023.

We also actively worked with the Impact Investing Institute in supporting a campaign for a green gilt in the UK, which ultimately saw the UK government issue its inaugural green gilt in 2021 and commit to reporting social co-benefits. With our experience as active investors we are strong believers in the potential of the bond market to play a growing role to address social needs through our advocacy and education of issuers.

Why impact?

“We believe in scaling investment for positive social outcomes, alongside financial return”

As defined by the Global Impact Investing Network, impact investing is an investment with the intention to generate measurable social impact with financial return.3 These dual objectives are key: we aim to give investors the financial return they would normally expect for the risk they’re taking – but in addition we want to optimise social benefits through the investments we make. This is what we call “social alpha”.
Therefore our process starts with the financial opportunity. Investments are avoided if they fail our financial assessment standards, based on a process led by research intensity. This relies on an experienced team of dedicated research analysts and an in-depth proprietary bottom-up research approach (Figure 2). If the financials don’t work then we won’t progress.
Figure 2: fundamental credit research – what our analysts consider at company level
Source: Columbia Threadneedle Investments, May 2023.
Then we apply that same research intensity principle to the social impact assessment. Unlike the financial analysis, which revolves around issuing entity-level analysis, our social impact analysis is conducted at bond level, as different bonds by the same issuer can deliver differing social outcomes. There are two parts to our social impact analysis: a qualitative and quantitative component we call social “intentionality” and social “intensity” respectively.

Intentionality    This is consistent with the principle of an impact
investment. This looks at the intention to have positive impact,
and how strong that intention is

Intensity  This looks at multiple measures to gauge who and what
benefits from the outcomes:

Because of our social objectives we usually seek investment opportunities that target those areas that are more deprived or of more social need. Our social methodology is guided by an evidence-led approach because measuring social impact is more complex than measuring, for example, climate impact, which can be explicit in terms of a carbon measure.

Through this evidence-based proprietary process we have been able to show our track-record of improving impact through intentionality and intensity. Because we quantify outcomes at bond level, we can aggregate up from here our individual evidence based measures across outcomes, populations and regions.

In order to support the principle that impact investing is measurable, we partner with social experts who play a key role to review, advise and report on our impact.

Social partner

For the CT Global Social Bond strategy we partner with the Good Economy – highly credible, deeply experienced
impact advisors. Their role is to review, advise and monitor social impact via the independent Social Advisory Panel and produce an annual impact report. The panel, which will set the initial social targets and look to increase the social intensity over time, also includes social impact adviser Steward Redqueen.

Why global?

“It is a natural evolution to grow our opportunity set and deliver impact via an investment opportunity
set that is global”

We launched the CT UK Social Bond in 2013 with the intent to deliver better outcomes for people in the UK. Then six years ago we launched the Threadneedle (Lux) European Social Bond to deliver the same objective but to people within Europe. Now, in launching the CT Global Social Bond Fund, we are delivering a natural extension of these existing ideas through a wider opportunity set and widening our impact globally.


Columbia Threadneedle Investments has a strong track-record in managing social impact funds over a period of 10 years, and we have more than €1 billion invested in a range of portfolios for clients. Having launched a unique concept with the UK social bond and expanded this out to Europe, we are very excited about this opportunity to take our innovative approach to the next level – delivering financial returns and doing good for society on a global level.
1 United Nations, Inequality – Bridging the Divide.
2 World Economic Forum, Ranked: The largest bond markets in the world, 17 April 2023.
3 https://thegiin.org/impact-investing/

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