EYE Scream, You Scream, We All Scream for EYE Bonds!


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Three firsts for the Education, Youth and Employment Bond program

* By Michelle Viegas

On September 23, 2014, a delivery of 16 pints of Ben & Jerry’s ice cream arrived to the Boston office of Breckinridge Capital Advisors. Observers may have assumed that it had been ordered for a celebration, perhaps for a company anniversary or an employee’s retirement or birthday.  That day, however, similar deliveries were made to various companies throughout Boston, including Zipcar, Patagonia and Invested DevelopmentBen & Jerry’s was simply thanking them for their contributions as fellow certified B Corps – companies that meet rigorous standards of social and environmental performance, accountability, and transparency. As the certifying non-profit B Lab explains, “B Corp certification is to sustainable business what LEED certification is to green building.”

Three firsts for the Education, Youth and Employment Bond programBreckinridge Capital Advisors, an investment adviser specializing in high-grade bonds, earned its B Corp certification because it integrates sustainability throughout its business model, from selecting investments in vital-service projects and companies that adhere to ESG principles, to offering clients the option of sustainable mandates that align with their values.  It is this approach that led Breckinridge to be among the 24 investors to purchase the first-of its kind Education, Youth, and Employment (EYE) bonds on September 17, 2014. Socially responsible investors like Breckinridge were attracted to the themed bonds because the proceeds will fund education, youth and employment projects in Latin America and the Caribbean.  The Inter-American Development Bank (IDB), which issued the triple-A rated, four-year bonds, will make loans to build human capital by improving the quality of education and enhancing the skills of young people entering the job market.   The US$500-million issuance marked the launch of the EYE Bond program, as well as other significant “firsts:”

  1. The IDB’s Finance Department partnered with the IDB Social Sector Department to design and launch the bank’s first themed bond program;
  2. Citi Capital Markets leveraged the strengthens of Citi Microfinance for the first time; and
  3. Breckinridge and long-time IDB partner, Acción, among others, purchased the IDB’s bonds – a new product for both.   


So why all the fuss?  Why did the IDB receive more calls than it could answer when the issuance was announced?  The answer is related in part to green bonds, which in recent years, have whet the appetites of investors who seek to directly benefit the environment through their portfolios.  Since the first green bond issuance in 2008, there has been an accelerating global proliferation of green bonds.  According to The Economist article “Green Grow the Markets, O,” US$3 billion of green bonds were sold in 2012, compared to US$20 billion in the first half of 2014 alone.   By the end of 2014, the cumulative value of all green bonds may be close to US$50 billion.

Zurich Insurance, which serves customers in 170 countries and manages a US$200 billion portfolio, plans to invest up to US$2 billion in green bonds.  The company is also seeking opportunities to contribute to socioeconomic development in low-income communities through its investments.  The EYE Bond program provided one such opportunity.

Similar to many green bonds, EYE bonds segregate proceeds for use on specific projects in pre-determined sectors, and the IDB will report annually on the projects funded.  The bondholders are not exposed to the risk of the funded projects but rather the Aaa/AAA credit of the IDB. 

Triple-A rated bonds are appealing to many investors, but similar to ice cream aficionados who must decide between Cherry Garcia, Chunky Monkey and a host of other tantalizing flavors, investors can chose from among many attractive options for their money. The EYE Bond program adds social sector-themed bonds to the menu.  If the second EYE Bond issuance, which was driven by investor demand only two weeks after the first, is any indication, social sector-themed bonds are here to stay.  And in a US$80 trillion bond market, there is ample room for this product to grow.

 * About the author:
Michelle Viegas joined the IDB’s Office of Outreach and Partnerships in 2010. As a Partnerships Officer, she develops and manages strategic partnerships with foundations, corporations, nonprofit organizations, financial institutions, universities, and governments in the areas of impact investing, transportation, health, transparency, and gender, among other topics. From 2005 to 2010, Michelle was the Director of Programs and Strategic Outreach at Worldfund, a US-based organization that invests in high-quality and results-driven education in Latin America. Michelle holds a B.A. from the University of Notre Dame and a J.D. from Harvard Law School.

Last modified: Septiembre 12, 2016

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