Have you heard about “Social Bonds,” which have been attracting increasing attention in Japan and abroad in recent years? In July of this year, JICA issued a new social bond, the “Peace Building Bond,” which, as its name suggests, is designed to strengthen efforts to realize a peaceful society. On the occasion of the International Peace Day on September 21, we took a closer look at the background of the “Peace Building Bond” and the thoughts of those involved in its issuance.
Momo Hirata, JICA Finance Department
Peace Building Bond, Japan’s first bond that limits the use of the bond to projects aimed at building peace
As of 2020, there will be 56 ongoing armed conflicts in the world, and in 2022, the number of refugees and displaced persons will exceed 100 million – both record numbers. Both of these numbers are the worst ever recorded. In particular, successive armed conflicts in Syria, Afghanistan, Ethiopia, and Russia’s invasion of Ukraine threaten people’s lives and greatly hinder sustainable development.
JICA is working in Asia, Africa, the Middle East, Europe, and elsewhere to build resilient countries and societies that will prevent conflicts from occurring or recurring, but achieving this goal is of course no easy task. In order to further strengthen these efforts toward global peace and stability, and to inform more people about the current situation in the world and peacebuilding efforts, we have issued the “Peace Building Bond”.
The Peace Building Bond is the first bond in Japan that limits the use of funds to projects aimed at peacebuilding. With the increase in conflicts around the world and the growing number of issues to be resolved, we thought this was the right time to choose this theme, given the growing interest in peacebuilding both in Japan and around the world,” said Momo Hirata, who is in charge of issuing Peace Building Bonds in JICA’s Finance Department.
JICA is the first domestic issuer of social bonds
Since fiscal 2008, JICA has raised part of the funds needed for its activities from the market by issuing “JICA Bonds (Japan International Cooperation Agency Bonds)” In fiscal 2016, JICA became the first bond-issuing organization (issuer) in Japan to issue “Social Bonds (Social Contribution Bonds) (Social Contribution Bonds)” in accordance with the guidelines (Note 1). Since then, all bonds issued in Japan have been issued as social bonds.
So how are the funds raised through JICA bonds being used?
JICA, as a centralized implementing agency of Official Development Assistance (ODA), is engaged in projects for socioeconomic development of developing regions, and its three main operations are “Grant Assistance”, “Grant Aid”, and “Technical Cooperation”. The funds raised through JICA bonds are allocated to “paid financial cooperation” (i.e., “yen loans” to developing country governments and “overseas investment and loans” to the private sector).
The number of investment announcements (Note 2) for JICA bonds has been growing, especially since FY2017, with a cumulative total of 277 investment announcements by FY2021.
The reason for the increase in the number of investment announcements,” says Mr. Hirata, “is that, in addition to the increased awareness of JICA bonds, investors, including corporations and local governments, as well as the general public, are becoming more interested in the SDGs.
JICA bonds are also positioned in government policies as a tool for mobilizing funds to achieve the SDGs.
On the other hand, since JICA contributes to all 17 SDG goals, investors have voiced their desire for JICA to narrow down the scope of its activities so that they are easier to understand. Therefore, starting in fiscal 2019, we will begin issuing “theme bonds” targeting specific themes and regions. Starting with the “TICAD Bonds” issued in the wake of the “Tokyo International Conference on African Development (TICAD)” held in Yokohama, we issued “New Corona Response Bonds” in the following fiscal year 2020 and “Gender Bonds” in fiscal year 2021.
We received a lot of positive responses, saying that the theme was easy to understand. We received a particularly strong response to the Gender Bond, which limits the use of funds to projects that promote gender equality and women’s empowerment, and we felt a strong interest in gender issues in Japan. We felt a strong interest in gender issues in Japan,” said Ms. Hirata.
Note 1: Social Bond Principles (International Capital Market Association)
Note 2: An investment statement is a public announcement of an investment made at the investor’s own initiative.
For peace and stability in countries and regions affected by conflict and civil war
The “Peace Building Bond” is the fourth thematic bond. Funds will be used exclusively for ongoing or new projects in countries or regions affected (or being affected) by conflict or civil war that contribute to peace and stability or reconstruction.
How Peace Building Bonds Work
Currently, the funds will be used for social infrastructure projects in Turkey, which has hosted many Syrian refugees since the Syrian Civil War in 2011, to create a peaceful and livable society for both the refugees and the local residents who host them, and for the reconstruction and improvement of road networks in Mindanao, Philippines, which has been in armed conflict for more than 40 years since the 1970s. The funds will be used to support the reconstruction and improvement of the road network in Mindanao, Philippines, which has been the scene of armed conflict for more than 40 years since the 1970s.
In addition, the funds will be allocated for post-war reconstruction assistance to Iraq.
Learn about the current situation for world peace and stability. Think of it as your own business
Many investors, including financial institutions, local governments, and corporations, have expressed their willingness to invest in the Peace Building Bonds since their issuance in July,” says Mr. Hirata. Some of the reasons for investment include: “As a country that has experienced war, we want to contribute to world peace,” “Based on our postwar reconstruction experience, we want to make investments that only Japanese organizations can make,” and “We want to entrust JICA, which has a proven track record in peacebuilding support. Another commented, “This is the first time I have learned that there are so many conflicts happening in various parts of the world. I feel that the Peace Building Bond has led to people becoming aware of the current situation in the world.
Although JICA does not issue Peace Building Bonds for individual investors, JICA issued the first social bond for individuals in seven years last February as “JICA SDGs Bonds”, a bond for individuals who can invest from 10,000 yen (retail bond), and is scheduled to issue again in the fourth quarter of this fiscal year We plan to issue the bonds again in the fourth quarter of this fiscal year. The bonds have been well received by young people in their teens and twenties as a casual way to contribute to international cooperation. According to a report on individual investors (Note 3), among all age groups, those in their 20s and 30s have the highest awareness and ownership of SDG bonds that aim to contribute to the SDGs, such as JICA’s social bonds. It is evident that young people have a high awareness of social contribution and SDG bonds.
Image graphic of the JICA SDGs Bond, a social bond for individuals
In addition, the “Courses of Study” for high schools have been revised this year, and “financial education” to acquire the ability to manage and invest money has become compulsory. Classes to enhance financial literacy have also been included in junior high schools since last school year. It is expected that financial awareness among young people will continue to increase in the future.
As society as a whole becomes more aware of the SDGs, including peacebuilding, I believe there will be more and more opportunities for people to choose investment as a tool for international cooperation and social contribution. First of all, through the Peace Building Bonds issued this time, we aim to promote peace and stability in the world, and at the same time, we would like to create an opportunity for more people to look at conflicts and poverty and see global issues as ‘their own business'”.
Note 3:
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