Japan’s $1.48 trillion Government Pension Investment Fund (GPIF) and the Council of Europe Development Bank (CEB) have launched a partnership to promote and develop sustainable capital markets. Their focus will be on social bonds, and the incorporation of ESG assessments in fixed-income investments.

“GPIF requires all asset managers to integrate ESG into their investment analysis and decision-making,” Hiro Mizuno, CIO of GPIF, said in a statement.

“We regard the purchase of green, social and sustainability bonds as one of the direct methods of ESG integration in the fixed income investment.” The CEB’s social bonds are issued in alignment with the “social bond principles” that are administered by the International Capital Market Association (ICMA), a Switzerland-based not-for-profit membership association with more than 580 members in 62 countries.

According to the ICMA, social bonds are the use of proceeds bonds that raise funds for new and existing projects with positive social outcomes. The social bond principles “promote integrity in the social bond market through guidelines that recommend transparency, disclosure and reporting,” says the ICMA.

“They are intended for use by market participants and are designed to drive the provision of information needed to increase capital allocation to social projects.” The CEB launched its first social inclusion bond in 2017 and has since issued a total of €1.5 billion ($1.67 billion) of such bonds.

The proceeds of the bonds are earmarked to finance projects considered to have a high social added value in social housing, education, and job creation and preservation in micro, small, and medium-sized enterprises, throughout Europe.

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