Virtual Roundtable: Can Social Bonds Help Save the World?

Scheffer: Thank you, Julissa, and good day everyone. I am David Scheffer, a visiting senior fellow at the Council on Foreign Relations and the Tom Bernstein fellow at the U.S. Holocaust Memorial Museum. I'm working on a project for both the museum and the Council on the subject of today's roundtable. Today's discussion is part of the Council's Roundtable Series on Human Rights Issues, and it is on the record. Before I introduce our speakers, I want to convey to you that for several years, I've been exploring the social bond market for the purpose of enhancing the funds available to meet the needs of international criminal justice and the victim populations of atrocities. At the beginning of this inquiry, the idea of social bond funding seemed almost bizarre to most of my audiences, whether they be tribunal or humanitarian organization officials. But within the last two years, the social bond market has exploded, not only in its magnitude, but in its range of social policy objectives.

The COVID-19 pandemic, and the surge of social bonds in Europe, including with the European Commission, has been a shot in the arm, no pun intended, for this form of private financing for very worthy public causes. Now in the result, bonds that address social themes and appeal to the rapidly expanding class of socially concerned investors have continued to be the fastest growing sector of the bond market, and they have become a pillar of humanitarian investing. The rising appeal has been influenced by evidence that sustainable investments can outperform traditional ones. So while COVID-19 catalyzed the rapid rise of social bonds issued in 2020, the interest in these bonds is expected to last far beyond the crisis, and to increase further in 2021.

Meanwhile, victim populations are suffering not only from the pandemic, but also the atrocities inflicted upon them in the past, and currently, such as vast victim groups in South Sudan and Central Africa, the Rohingya of Burma, the civilian population of Yemen, the Syrian people writ large, and the nearly eighty million refugees and displaced people usually fleeing atrocities across the globe.

Are their opportunities to meet these challenging needs in the social bond market?

To help us answer that question today, we have two experts, one on the social bond market, and the other on the needs of atrocity victims, who, by the way, seek not only reparations, and basic support for their survival, but also justice. And those are expensive propositions.

Our first speaker is Maud Le Moine, the head of SSA debt capital markets at Goldman Sachs and based in London, SSA standing for sovereign, supranationals, and agencies. She has a fifteen-year track record at Goldman Sachs and worked on one of the very first social bonds, which she'll describe, and in this position, she interacts with many international organizations, including the World Bank, African Development Bank, and European Commission. She has provided invaluable advice to me over the years about the social bond market. The second speaker is Maya Shah, the head of operations of the Global Survivors Fund, which focuses on victims of sexual violence arising from atrocities in Africa and elsewhere. So she is on the front line along with GSF’s Dr. Denis Mukwege, who won the Nobel Peace Prize in 2018 for his work with victims of mass sexual violence. Prior to joining GSF, Maya worked for twenty years with Médecins Sans Frontières in field positions and headquarters where, until recently, she successfully ran large-scale innovation projects. I've asked Maud to go first and provide her perspective on the social bond market, including briefing those in the audience who may not know much about this specialized market. Maud the floor is yours for about ten minutes.

Le Moine: Thank you very much, and good morning. Good afternoon, everyone. And thank you again, David, for having me today to discuss such an important topic in the market. As David mentioned, my name is Maud Le Moine. I'm responsible for debt capital markets coverage of public sector clients at Goldman. And as such, I've worked with a number of multilateral development banks in structuring and issuing debt products in the markets including social bonds. So perhaps I thought I would start with a little bit of background on the ESG bond market as a whole and the evolution of the social bond market specifically.

Really, it has started fifteen years ago with the first social bond at the time, not called a social bond. But IFFIm was really the true first social bond issuer. The International Finance Facility for Immunization issued the first bond with a specific use of proceeds at the time directed towards vaccination programs in poorer countries. It has since evolved to include: the European Investment Bank issued the first climate awareness bond in 2007, then the World Bank issued the first green bond. And from sporadic issuance, the market has grown to represent around €400 billion of issuance for 2020, which to give a little bit of perspective represents a huge increase from only five years ago, where it stood around €90 billion. So this is obviously a substantial growth in a very short period of time. But just also to give a little bit of context, it's still a fairly small portion of the overall bond market. It's sub-10 percent of the overall bond market.

So really, what are ESG label bonds and what role do they perform in the markets? ESG label bonds are fixed income debt instruments, which means that they are issued in the market with a specific use of proceeds. This is the key difference with any normal debt instruments, where usually the use of proceeds are for general corporate purposes. In this case, they are issued with a specific purpose. They can take several forms. The most common are still green bonds with proceeds directed towards environmentally friendly projects. And in the family of ESG bonds, you’ll also find the likes of sustainability bonds, social bonds, and many subcategories (climate transition, climate resilience, education, sustainability in bonds, etc.). They all perform a very similar function, which is to direct investments towards a specific set of projects. I think that's incredibly key, as they perform the role of aggregating demand towards a specific set of projects that have a social outcome.

And since 2017, ICMA, which is the International Capital Markets Association, has worked on a set of guidelines called the Social Bond Principles that really lay out the objective criteria for social bonds. And they are based on four pillars: the use of proceeds, the project evaluation, management of proceeds, and reporting. And the purpose of the Social Bond Principles is to set out a common base for the definition of social bonds and really ensure the transparency and accountability.

So the way they work is the issuer, if we take an international organization, such as the World Bank or the African Development Bank, will set out a framework in which they describe the types of projects that they intend to finance. Sometimes they'll have very clear exclusions as well. But generally describe the types of eligible projects that will be financed under that framework. And they also usually explain the performance metrics and also how they will report. The reporting is very key, as investors at the point of investment do not necessarily know exactly how their funds will be allocated into certain projects. They will only know later on when it's reported by the issuer.

So the social bond also performs the function of issuing upfront for needs of projects that will be dispersed over time. This is a key element, which was the entire construct of IFFIm at the time, as the needs are usually very important to tackle quickly. And so there's a need to raise money upfront. And projects can be dispersed over time. To give you perhaps an idea of the types of projects that are included as eligible projects under the Social Bond Principles and what most social bonds finance, these would include, for example, affordable infrastructure, access to essential services, affordable housing, employment generation, food security, or any social or economic advancement or empowerment. This is a broad definition of what the project can include, but to give you an idea of what they have financed in the past.

So why are they so important? And I think that's quite an important topic of discussion here. And I think, for me, the key is that really any of these projects would not normally be financed directly. They would be too small, too risky for any investors to be financing directly or at attractive economic terms. So really what the World Bank or African Development Bank or any other multilateral development institution, the role that they perform, is to aggregate demand for this product and therefore ensure the deployment of capital in the most needy places. So if we take an example of the World Bank raising a billion bond, for example, they'll manage their balance sheet dynamically. Therefore, this billion will really serve to finance a number of different loans. And over time, the World Bank is able to access the market thanks to its high credit rating, their standing in the market, their global investor following, and their longstanding market presence. They're able to raise this billion at very favorable terms, and they're therefore able to lend at very favorable terms, and this is the key to the entire construct. Given the COVID crisis, somewhat unfortunately, it has resulted in a significant surge in the social bond market last year as a portion of the overall ESG market, given all of the difficulties that countries have faced to cope with lockdown measures and generally the effect that it had on people, small businesses, the healthcare sector, etc. So if we take the difference between 2019 and 2020, the social bond market has almost increased tenfold. So it's a huge increase. And one of the biggest portions of this development was the EU SURE program, which has become one of the largest social bond issuers in the market since they created the program in the summer of last year. The SURE program is a €100 billion temporary support to mitigate unemployment risk in an emergency, and it is intended to be entirely financed in social bond format. They have already issued €53.5 billion of that program and have an entire envelope of €100 billion. So they can fund the rest over the course of this year. It was entirely created as a result of the pandemic and is designed to urgently provide financial assistance in the form of loans to member states.

And so, I think the question that we are often asked about social bonds is really, who buys social bonds? What is the appeal for investors? What is the difference between a normal bond in terms of payout structure, and things like that? And so, first of all, I think the background is that, generally speaking, what we are seeing is there is an increasing realization from both public and private sector market participants that a lot more needs to be done in the field of sustainability as a whole. ESG investors and social bond investors can really be any investors. What we're seeing in the market is central banks, asset managers, pension funds, retail investors, foundations, etc. can be interested in this product. Generally, the investor community as a whole is increasingly putting in place sustainable investment strategies, and as such, they're trying to find suitable financial products to fit their strategies, and social bonds are one very good example.

How are investors repaid? Well, social bonds themselves are really used to finance loans. So the purpose of these multilateral organizations is to aggregate the demand. They have the expertise on the ground. They are able to do the due diligence of the project, and they have backings of governments that are their shareholders and, therefore, have higher credit ratings and are able to access the market at favorable terms. As such, the projects themselves really finance loans and therefore generate a return themselves, part of which is paid to investors in the form of usually a fixed rate coupon. Some instruments have been designed to have a slightly different payout structure with predefined targets. For example, it's been seen in KPI-linked bonds, where there is a step-up or step-down coupon when the targets are met or not met, depending on what the targets are. But the very vast majority of social bonds issued in the market have a fixed coupon and therefore fixed return to investors. I think that's quite an important point because the growth of the social bond market is also driven by the depth of the fixed income investor base. And this is an investor base that's generally focused on the liquidity and generally conservative in their risk profile. And therefore, it's important that there is a fixed return. For example, there are other types of instruments that exist in the market, such as social impact bonds, and it's important to differentiate those two social bonds that I'm talking about, because social impact bonds are slightly different instruments. They're generally much smaller in size, and they have a payout structure that's directly linked to the successful outcome of pre-agreed social benefits, but they are much more similar to equity products in nature, and they are much higher risk instruments, and they do not have a fixed return. So they are different instruments. They are called bonds as well but generally not issued as broadly in the market as social bonds are at the moment.

Scheffer: Maud, if I may, perhaps another thirty seconds or a minute, and then we'll move on to Maya.

Le Moine: No, of course. I mean, I think that's a broad overview. I think you wanted to discuss specifically, the application that it can have on international criminal justice, but I can take it as a question afterwards.

Scheffer: Exactly. Thank you so much. That's an excellent brief. I'll share that with every student I ever teach. Maya, the floor is yours.

Shah: Thank you. So good morning, and good afternoon, everyone. And thank you, David, for inviting me today. And as you mentioned, yes, I'm the head of operations for the Global Survivors Fund. So this is a global fund for survivors of conflict-related sexual violence. The fund’s mission is to enhance access to reparations and other forms of redress for survivors of conflict-related sexual violence across the globe. So the fund was established in October of 2019 by Dr. Denis Mukwege and Ms. Nadia Murad, a survivor herself, after they both received the Nobel Peace Prize in 2018.

It is also the realization of a vision that was long held by survivors through the SEMA network. So this is a network of survivors from over twenty countries in the world that have been lobbying for reparations. Additional to this, the fund was endorsed by the UN Secretary General in his statement to the Security Council in April of 2019, where he strongly encouraged governments to support this fund.

So what is the purpose of the Global Survivors Fund? Well, it's to fill a gap in addressing the rights of survivors by providing interim reparative measures, and this is when states are unwilling or unable to do so. And while we recognize that it is a government's responsibility to provide reparations, often they are not able or not taking this responsibility. But we cannot leave survivors behind, because reparations are a right. So the main principles to the fund’s approach are, one, a survivor centered approach, and this is really to co-create projects with survivors, so not for survivors but really with survivors. The second fundamental approach is local and contextualized solutions. So really looking at the different countries where there are projects and the local solutions available in those countries with survivors. The third is a multi-stakeholder approach. So that's including survivors, civil society organizations, activists, local authorities, and UN agencies within what we call the steering committee that runs the project, so that there is a lasting impact of these projects.

So the three main pillars of our work at the fund are what we call act, advocate, and guide. The act pillar is really to provide interim reparative measures. So we work with local civil society organizations that are our implementing partners, and we provide interim reparative measures in the form of compensation. Currently, we have three projects in the Democratic Republic of Congo, in Guinea, and in Iraq. And we're looking later this year to open in Central African Republic and Nigeria and possibly South Sudan.

I was in the Democratic Republic of Congo three weeks ago, where there is an estimate of between 200,000 and 400,000 victims of conflict-related sexual violence. And I was discussing with the head of the National Survivors Movement there what it means. And she basically said that survivors, what they want really is an acknowledgment of the crimes that were committed against them, to not be blamed for what happened to them, and to receive some sort of compensation. And whilst at the fund, there is no way we're going to be able to cover all the victims of conflict-related sexual violence in the Democratic Republic of Congo. What we can do through our project is to show that interim reparative measures are possible and to act as a catalyst then for governments to take on the responsibility.

The second pillar of our work is called advocate, where we really want to make survivors’ voices heard in order to influence at the international, regional, and national level policies that will then prioritize reparations and allow governments to take their responsibilities in providing reparations. And that leads me to the third pillar of our work, which is the guide pillar. And in this pillar, this is where we look to provide technical assistance and expert advice to support governments who want to put in place reparation programs, but to ensure that these programs are really survivor-centric and that they have a survivor-centered approach. Another part of our work is we are currently doing a country mapping study of over twenty countries to look at the state of reparations in different countries around the world and then to be able to make a better informed decision of where we want to put in place projects.

So currently, the fund is funded through institutional funding, so through government donations. But in general, there is not a lot of sustainable funding for human rights abuses, but specifically for conflict-related sexual violence. And the needs in this field really vary from the immediate life saving needs of health care and psychosocial support, then to much more long-term needs, such as restitution of livelihood, education, support, and financial compensation, which these require, of course, substantial resources and extended periods of time. And as I mentioned before, when you look at a contextualized approach, these kinds of reparations are going to differ whether you're doing it in Ukraine compared to Central African Republic compared to Iraq. You know, one size doesn't fit all in these different contexts. But I don't think that this should be a deterrent to start providing reparations, and neither should having to put in place all the transitional justice mechanisms before. We strongly believe at the Global Survivors Fund that reparations are a right. Survivors have a right to them. And therefore, in fact, when you put in place interim reparative measures, often you are empowering survivors by making them reestablish dignity, have livelihoods, have health care, and so to be able to benefit from this, to be able to then go through the transitional justice mechanisms. But of course, all these need some form of sustainable financing and innovative financing mechanisms. So I hope that we'll be able to discuss this further today. Thank you.

Scheffer: Thank you so much, Maya. That is excellent. I'm going to ask a few questions and then at the thirty-minute mark, or approximately that, we'll open it up to the audience. Maud, could you dip into what we worked on for a couple of years whereby we were looking at a particular type of social bond that is of an endowment character that's generating annual revenue. That could be extremely useful either for a tribunal or for an organization like Maya’s that might be looking for a steady stream of revenue year after year as sort of a base set of revenue that they could rely upon, as opposed to a huge expenditure of money in the first or second year of a bond.

Le Moine: Yeah, absolutely. I know we've been discussing this for a couple of years. So first of all, perhaps I should mention that it's an extremely worthy cause, and one that should generate interest from ESG investors. I think the problem is trying to find a structure that works and fits within the criteria of investments of fixed income investors, if large sums of monies need to be raised, or other types of investors depending on how much is needed. The idea of an endowment social bond is certainly an option. But I would raise a couple of points that I think are important to understand. In order to attract fixed income investors, and I say fixed income investors because they are the largest pool of investors out there in terms of ESG investors at the moment, the fund itself would need to have a certain rating if the fund is to issue a bond in the market and generate interest. And that's unlikely to be a high rating without the backing of certain sovereigns and a structure that, David, we have discussed over the years. If the structure were to work, the fund would need to have, ideally, at least an AA rating in order for the money to be raised in the market at a certain economic term, which would then be able to be invested in the market to generate enough returns to generate a steady stream of revenue. And so a high rating is really the key to making the structure work in order to have affordable terms in the market and be able to invest it and generate the needed returns.

Scheffer: Thank you so much. Maud. Maya, you touched on this in your remarks and I want to try to emphasize it to our audience. You used a couple of examples of a gap between the need and the actual resources available to deal with reparations. Could you expand on that just a little bit and sort of emphasize how large is this gap of funding for these humanitarian purposes for victims, particularly when they involve issues of reparations?

Shah: Thank you, David. I mean I certainly can't put a monetary figure on it today. But what we know is that the needs of victims are huge, because it goes from life-saving care, long-term psychosocial support, to compensation, restitution, and rehabilitation. And if you look at that, that can be from livelihood programs; reinsertion because often they're completely stigmatized out of the communities, lost all their jobs; education for children, children born out of rape particularly that also are ostracized from society; and if reparations programs are being put in place, it's also compensation on a monthly basis for the survivors. So there is a range of needs that are there, and each with varying amounts, but we can see that the numbers of survivors are enormous. And so yeah, I can't give you a monetary figure, but just the needs are huge.

Scheffer: And let me jump back to Maud. We've talked, you and I, about the whole phenomenon of pre-qualified investors. I get this question quite often from organizations. They don't want any and all investors stepping up to help them. For example, if they're a humanitarian organization, they may not want gun manufacturers to be in their investor pool. Can you just expand on that a little bit? When you put a social bond together, how do you structure the pre-qualified investors so that the organization is confident in that investor pool? Or do you do it at all for some of the bonds?

Le Moine: That's a good question. When we issue social bonds in the market, it's a fairly quick process. And so there's a lot of preparation ahead of the issuance itself, setting up the framework in place, perhaps marketing for a number of weeks ahead of a potential bond issue, but the issuance itself is fairly quick. The issue will rely truly on the banks and the lead managers of the bond to have KYC. So know your customer. KYC to all of the investors that are in the transaction, and they will have access to the list of investors. And they can choose to exclude some of them if there were any concerns with the background of the issuer. They will mostly rely on the bank’s proposal of allocations and things like that, but they have the ability to exclude any investors if they wanted to. I must say we've never come across an issue, given the types of investors that are generally interested in these bonds. We're talking about central banks and large asset managers that are very well known, pension funds that are also large pension funds, European pension funds, Canadian pension funds, or U.S. pension funds that are very well known. So these are large institutional investors that are very well known by the market.

Scheffer: Thanks so much. You know, I think I'll be following strict rules here. We're at the thirty-minute mark, and I want to open up the floor to our participants in this roundtable. I'd like to first just see, I see on my list of participants that Naomi Kikoler is actually with us. Naomi, I wanted to give you a chance to say just a few words, if you wish to. But now would be the opportunity, if you'd like to come on board.

Kikoler: Thank you so much, David. Appreciate that. And just want to congratulate also Maud and Maya just for the phenomenal presentations. On behalf of the U.S. Holocaust Memorial Museum, we're incredibly honored to be able to help advance the work that you're doing, David. Along with CFR, I did want to thank our colleague, Erin Rosenberg, and your colleague, Madeline Babin, for their work.

I think from our perspective, as Maya especially highlighted, this is one of the most challenging, vexing, and urgent issues that many of the communities that we work with are seeking to find a way to address and are seeking innovative solutions too, so I really commend the effort that all of you are doing to try to find innovative sources of funding. I think we all know, as we look at the experience of the Holocaust, the importance that reparations has played for many communities, while recognizing that you can never truly restore or return a person to the life that they had prior. But the importance of finding creative solutions, as you're doing, is really I think something that needs to be commended. I think the big challenge, and the challenge that I've raised with you, David, at times, and I'd be curious for Maya and Maud to build a little bit on your comments is around the political will, especially of governments and large multilateral organizations, to step up and increasingly support these types of initiatives. I'd be curious where you see there being potential openings. Are there specific governments that you think are particularly promising, or other multilateral institutions that have shown an interest in using things like social bonds? But again, just a profuse, on our behalf, honor to be involved in this particular project, and we very much hope that for the various communities we work with today, the Yazidi, the Rohingya, the Uighurs, and others, that your innovative approach to this will help to ameliorate the very big challenges that they face for the future. So thank you so much.

Scheffer: Thank you, Naomi. Maud, would you like to just take on Naomi's question about the willingness of the multilateral banks and of governments and I might also add of large foundations to step into this breach?

Le Moine: Absolutely. And I mean, generally speaking, multilateral development banks are incredibly willing to step up to the plate when they can. If you think of all the ones that are currently existing and active in the market, they have responded incredibly quickly last year to the needs of their member states following the pandemic; have mobilized incredible amounts of resources; issued very quickly what was needed to disperse funds very quickly to the most needed places. So I think the multilateral development organization family as a whole has been incredibly quick to respond. And that has shown the willingness of the institutions to help when they can. At the political level, it differs from time to time, I think. We've also seen with the pandemic that there's also a great political willingness to step up. If you think about the European member states incredibly quickly getting together and forming a budget that was on multi-year to support the European recovery fund, but also their SURE program and other initiatives that were done in Europe. And over the years, capital increases of these multilateral development institutions, new ones have been put in place over the last few years in Asia, most notably with the Asian Infrastructure Investment Bank and the New Development Bank, to try and support the needs of specific regions. So I think there's an incredible political willingness as well. Generally speaking, what we're seeing, however, is that the structures also need to be quite clear. And accountability of these institutions is very high. So they have very high standards to uphold in terms of the types of project that they lend to and the result, as they have the impact in the local community. It's very important to guarantee their political willingness to participate.

Scheffer: Thanks a lot. And I want to get to our other questioners. But Maya did you have anything you wanted to add to that because you do have government contributors to GSF?

Shah: Yes, thanks, David. I mean, we do, but I think there are two things. I think governments sometimes will react when the political will is strongly there, when it affects them. So we saw that, for example, previously in the Ebola crisis, governments reacted when it started happening to them. And now in the pandemic, when it's happening to governments, they will have the political will to react quickly. We do have governments on our board, but I don't think there is enough being done. And the governments where these crimes are committed are perhaps not the ones reacting as quickly or as much as they should be. And while we believe that they do need to be taking their responsibility, I don't think we can always wait for political will to be there because the needs are so urgent, and we need to address them, but it's definitely a joint responsibility.

Scheffer: Thanks, Maya, shall we now go to Jonathan Berman. Jonathan, are you there?

Berman: Thank you. Sorry about that. I'm in a remote area. So if I phase out again, please go on to the next questioner. But while I'm in touch, David, thank you for hosting this meeting. And thanks also for asking Naomi to say a word. As a Holocaust descendant, it's uniquely gratifying to see the Holocaust Museum active on this topic.

Maud, my question actually was for you. I just wanted to go back to what you said about the distinctions between social bonds and social impact bonds. Could you just confirm that social bonds, the terms of the bonds are uncorrelated to the outcomes that are received, and if that's correct, and then on social impact bonds, if you could say a little more about how that correlation is achieved? Thanks.

Le Moine: Thank you, Jonathan, for the question. And yes, I can confirm that the terms of a social bond are uncorrelated to the outcome. And that reason is, if you think about the World Bank as a whole, they will have an issuance program per year of somewhere in the context of €60 to €70 billion. And part of this, they issue now all of their bonds under their sustainability debt framework. But if you think about perhaps the African Development Bank, they have a social bond framework, and that is only a portion of their debt issuance, but when they access the market to raise this portion of their program in social bond format, they access the market at the terms that are available to them at the time of accessing the market. What the investor is really buying at the time of the investment is the African Development Bank credit within the context of their social bond issue. So they know where their investment is going, they know the eligible project that will be financed with their funds, but the actual outcome is de-correlated to the terms. The market moves all the time, and at the time of issuance, the African Development Bank will be able to access the market at specific terms, and other times at other terms. However, the investor will have access to the impact of their investment, because all of the issuers of social bonds have the obligation to report on the use of proceeds and what they were used for and what the impact was. So the investor will have access to that. And I guess in theory, they can choose later on in the process to reinvest or not, if they are not satisfied with the impact that they are seeing. On the social impact bond, it's a slightly different construct where usually you have an outcome that is decided between a public institution in an area, if we take early childhood education, for example, where a municipality doesn't have upfront money to invest in early childhood education, but there's a strong correlation between making sure early childhood education is taken care of to influence the greater social benefits later on. And there's a study to make sure that the correlation is important. Then, effectively, it's calculated as whatever the municipality is saving in early investment by the private investor is returned to the investor if the social outcome is met.

Scheffer: Thanks, Maud.

Le Moine: I hope that's clear.

Scheffer: Yes, I hope so, Jonathan. Sarah Whitson, I think you're next on our list.

Whitson: Hi. Thanks to both of you. Maya, I'm particularly grateful for your characterization of the funds that you're raising and distributing as reparations and not charity. And two questions is why the focus exclusively on survivors of sexual violence, which is, of course, a much smaller pool, and much more idiosyncratic, frankly, than the larger population of victims of violence. And I wonder whether you are looking or considering assisting victims in places like Yemen or Gaza, which are much harder to get to, and yet where the needs are overwhelming, with thousands of people disabled by sniper fire or bomb attacks. And Maud for you, in terms of the social bonds, which, as you describe are effectively loans to governments, what are the criteria? Particularly given the fact that the reason that many of these countries are in such catastrophic economic situations is because they have tyrannical, abusive, corrupt governments, like Egypt, for example, where the World Bank and the IMF continue to provide loans to a government that is wholly corrupt, wholly controlled by the military, which enriches itself at the expense of its own people. So how do you ensure that you're not a part of the problem when you make loans to corrupt, abusive governments, where the World Bank and IMF fail actually to do meaningful due diligence?

Scheffer: Maya, why don't you go first on this one?

Shah: Okay, thank you. Thank you for that question. Yes, why are we focusing on conflict relating to the sexual violence victims? Because we feel that they are one of the most vulnerable populations. They are often very much overlooked due to stigma and shame and hardly ever recognized as war victims. And they really do merit the focus. And through this focus, we can break the silence because of the stigma. There's so much stigma attached, particularly to conflict-related sexual violence. And to your to your second question, yes, we are looking at, as I mentioned previously, in the country study, one of the countries where we're trying to look and work is Yemen, and Syria both, but particularly looking into Yemen and seeing how we can support survivors, whether they are outside of the country, and then to look to support through, but in very difficult circumstances. So indeed, we're looking into it.

Le Moine: Yeah, perhaps I can try to address your question to me as well. I think, first of all, I really cannot comment on behalf of any of these multilateral development institutions on what their due diligence procedures are. However, I would mention that they lend to individual projects, rather than at the sovereign level. The projects themselves are subject to scrutiny and due diligence, and they have the sovereign backing, so that in case the project becomes insolvent and is unable to pay back the loan, there is a sovereign guarantee, which is part of the reason the construct works. So that's a key part of the understanding of how the whole lending works. One thing I would say, though, is that if you think about the number of projects that are financed, it's really absolutely key infrastructure, or education, or healthcare projects on the ground. There might be issues at the broader level in the country where you also have to think about the number of people that these projects help on the ground. And I think that's the real key to these organizations and their purpose.

Scheffer: I see that Erin Rosenberg is on our list. Erin, did you want to perhaps ask any questions, since you've been so deeply involved in this project?

Rosenberg: Thank you so much, David. Um, yeah, actually, this is perhaps speculative, but I am quite curious of maybe digging into the question of political will matched with the issue of victims of atrocity crimes. I’m wondering whether both of our panelists, just in terms of bringing this concept, and recognizing as Maud you have identified, the types of projects that are typically funded. How would you view in terms of political will or just more generally the viability of projects that are aimed specifically at the reparative aspects addressed by Maya for victims of atrocity crimes?

Le Moine: Thank you, Erin, for the question. And I think that this is a topic that David and I have discussed in the past. And I think in the case of victims of atrocity crimes, there's a real strong case for frontloading support. And I think when we think about garnering political support, what is important to try and highlight is that the need to tackle mental health issues, quick economic recovery, integration, and early education upfront have long-term strong benefits. And I agree with Maya when she said earlier that countries step up when it's in their interest, and I think that's part of the answer. In trying to garner political will for this specific topic, it's very important to frame it in the context of the long-term benefits globally but also to specific countries. It has benefits that can transcend the actual quick reparation; it has long-term benefits in the economic development of the country, and therefore, its security, international relations, etc. And I think that's the framework in which to try and garner political support for this specific issue.

Scheffer: Thank you, Maud. I see we have Whitney Debevoise, who would like to interject.

Debevoise: Thank you very much. This is Whitney Debevoise of Arnold and Porter. I’m former U.S. executive director of the World Bank. This question is for Maud, could you talk about the various initiatives to start to regulate this ESG bond world in terms of standards and the like? And what impact, if any, you think that may have on the growth of this market?

Le Moine: Absolutely. Thank you, Whitney. The main development has been the development of the Social Bond Principles by ICMA, the International Capital Markets Association, which followed the Green Bond Principles. And now we also have another set of principles for sustainability bonds and sustainability-linked bonds. Generally speaking, the issuance of the first bonds have always preceded the existence of the principles, and the ICMA body has gathered private market participants, banks, investors, and regulatory bodies to try and understand how to frame the discussion, making sure that there's a common set of standards that are upheld by issuers, and that the word social bonds was not going to be used for just any types of issuance. And the green bonds have been accused of doing a little bit of greenwashing at some point when there wasn't enough of a standard. So I think that's the main development of the social bond market. And it has, I think, helped the social bond market, because it has provided issuers with very detailed guidelines and made the market a lot more transparent and also accountable. So I think it has greatly helped the issuers know how to frame their social bond issuance and how to focus their eligible projects, and it’s also given some confidence to the investor base as well that they are investing in a project that has a certain standard.

Scheffer: Thank you, Maud. Can I just ask a question? Oh, I see we have Patricia Rosenfield.

Rosenfield: Thank you so much for that question. And the earlier one about the role of philanthropies, private philanthropies investing in social impact bonds, particularly social impact bonds not just social bonds, prompts this question. I'm Patricia Rosenfield. I'm president of the Herbert and Audrey Rosenfield Fund, but I also work at the Rockefeller Archive Center where we look back at things like program-related investments and mission-related investing, and that's what I'm wondering if you're seeing. If foundations or some foundations are increasingly looking at mission-related investing, and divesting themselves of oil and gas and perhaps negative impact investments, if you're seeing an increase in philanthropic assets being invested in social impact bonds, and if not just in the United States, but in other private grant-making activities around the world?

Scheffer: Maud, I think that's for you.

Le Moine: Okay, and perhaps Maya will have a view as well on what she's seeing on the ground in terms of types of philanthropic investments, but on my side, absolutely. It's a general development that investors are incredibly focused on re-centering their strategies and making the sustainable, or ESG, or philanthropic part a greater part of their investment strategy. Foundations have been, in fact, the very early investors in social impact bonds. So I'm not sure if that has necessarily increased so much, but they were at the very beginning of the product when it first was coined and evolved. So I think that's still the case. In social bonds, specifically, we're seeing also foundations being active. But I would say that it's not the dominating investor base because of the sheer amount of volume that is issued in the market. So they don't represent the largest investor base. We're still talking about larger institutional money being the driver of social bonds.

Scheffer: Maya, did you want to add something to that?

Shah: Well, I think Maud covered it very well on who is investing. I don't have much authority on that.

Scheffer: Okay. Let's go to Jennifer Warner.

Warner: Hi, thank you both for your time. This is Jennifer Warner from the Elton John AIDS Foundation. As we're talking about social bonds and how they might relate or be different from social impact bonds, as well, it would be interesting to hear, Maud, your perspective on what problems are best suited for a social impact bond or social bond? So the distinction between why you might pursue one or the other?

Le Moine: I think there's one element that's absolutely key to a social impact bond, which is the correlation that we were talking about earlier. So, for example, I have looked in the past at doing impact bonds in developing countries. And very often the problem is that we lack data. So the problem in structuring the social impact bond is that you need a very strong historic correlation between a certain a certain problem and a certain outcome in order to build the case for a social impact bond. And that's really, I think, the key difference between the two.

The other thing that is important to differentiate the two is that the social impact bond will generally be a much smaller scale and very targeted. Therefore, it will be municipal level, a small issue that can be tackled with specific investment and has a great social benefit. Social bonds, generally speaking, are much larger, because we're talking about a much larger scale of projects that are being financed. I’m looking at the clock, which is why I stopped here.

Scheffer: No difficulty at all. I just want to cover one last issue if I might, and I'm afraid it's a question for Maud. When governments guarantee the social bonds, particularly if it's a reparations issue in the future, it's one way for the government to, and particularly if it's the subject government of the reparations, to actually weigh in with its own responsibility towards the victims. Rather than making a cash payout under reparations to the victims, they can step forward and guarantee a social bond, which, of course, the social investors, particularly if it's AA or AAA, will want to respond to. Can you just briefly tell us how concerned governments are about the contingent liability of providing a guarantee? Why would that worry them?

Le Moine: Fair enough. I think the general worry about contingent liability, and that's obviously a very generic statement. It does differ from country to country. But when we look at sovereign or state budgets, if the liability of the guarantee goes beyond the term of the governing body at the time, then it's very difficult sometimes for governments to be sure that the next government will uphold the similar guarantee. So it's difficult for governments to justify sometimes having guarantees or contingent liabilities over a period of time that goes beyond their term. That's generally the issue. But there are systems in place, and the shareholding of a multilateral organization is without limit in time. So, there are plenty of situations where governments have pledged over a period of time that goes beyond their term. But in the discussions that we have sometimes this is the problem that's being raised.

Scheffer: Thank you very much Maud. I think this brings us to the conclusion of our hour. I just want to say how pleased I am with our speakers. Maud, I know it was years ago, but you made the London School of Economics proud today. And Maya, for our friends at Médecins Sans Frontières, they're probably asking why in the heck are you at GSF still, so you made both of them proud. Thank you so much to our audience. And we will continue to forge ahead.