THE World Bank Group’s private sector arm, the International Finance Corp. (IFC), invested $100 million in a new social bond to be issued by a foreign subsidiary of the Ayala Corp.
The proceeds from the issuance of the social bond, to be issued by AYC Finance Limited, will support Ayala’s wholly owned subsidiary Ayala Healthcare Holdings Inc. (AC Health).
AC Health will be refinancing the development of a new cancer hospital; expanding its network of primary care and multispecialty clinics; and accelerating its digital technology initiatives.
“We are delighted to continue our impactful partnership with the Ayala Group through our investment in the Philippines’ first-ever healthcare-focused social bond,” said Jean-Marc Arbogast, Country Manager, Philippines at IFC.
“This important project will help improve healthcare in the Philippines at a critical time and strengthen the country’s human capital, which are important drivers of inclusion and economic growth,” Arbogast added.
Social bonds, IFC said, tie the use of proceeds to projects that aim to achieve positive social outcomes in everything from health and education to gender, affordable housing, and food security.
These bonds also offer an avenue for investors to generate returns while helping address social issues.
Ayala’s social bond, IFC said, is the first ever to be issued in the healthcare sector in the Philippines. It will support AC Health’s strategy to build an integrated health ecosystem designed to provide quality and affordable healthcare for more Filipinos.
AC Health’s strategy has the following key areas of focus: retail pharmacy; pharmaceutical importation and distribution; primary care and multispecialty clinics; tertiary hospitals; and health technology platforms.
‘Underinvestment’
“The pandemic exposed the massive underinvestment in the country’s healthcare system, reinforcing our thesis for entering the sector six years ago,” said Fernando Zobel De Ayala, President and CEO of Ayala.
“The Social Bond supports our strategic priority to scale up AC Health as a new growth platform, underpinned by its commitment to uplift the quality and access to preventive care in the country,” he added.
IFC said the investment also marks a catalytic step in the development of a real-sector social bond market in the Philippines.
Previously, IFC also helped promote the country’s green bond market after subscribing to the first two local issuances, creating a new asset class that is now being adopted by companies across sectors.
In light of Covid-19 and the social challenges borne from it, IFC said social bonds are now front and center of the thematic bond market, and demand is higher than ever.
Most social bonds issued this year have been related to funding for issues related to the pandemic. Social bond issuance reached US$165 billion in 2020. As of June 30, 2021, IFC has issued 63 social bonds, raising $3.8 billion in total.
“Addressing health gaps in the Philippines is a critical challenge that has been amplified by the Covid-19 pandemic,” said Rana Karadsheh Haddad, Regional Industry Director, Manufacturing, Agribusiness and Services, Asia and the Pacific at IFC.
“Our investment in this social bond from our long-standing client, the Ayala Group, will help strengthen the Philippines’s healthcare system at a crucial time while also helping to develop the market for social bonds, which is becoming an important tool for helping the private sector to manage the socioeconomic impacts of the pandemic and build resilience against future shocks,” she said.
The Social Bond is being issued under the new Ayala Health Social Bond Framework. Apart from IFC, it was also developed with assistance from the International Capital Market Association (ICMA)’s Social Bond Principles.
ICMA is an internationally certified institution whose guidelines are designed to promote integrity in the social bond market.
IFC said cancer is the third-leading cause of death in the Philippines, where cancer incidence and mortality are expected to grow steadily over the next 20 years.
Roughly half of patients are diagnosed at later stages, when results are less promising for patient survival.
An existing shortage of medical facilities, beds, physicians, and nurses has been exacerbated by the Covid-19 health crisis, which has put additional strain on the health system and resulted in overcrowding of hospitals.