Social bonds: financing the recovery and long-term inclusive growth

With its triple impact on education, income and health, the Covid-19 crisis has exacerbated existing inequalities, both among and within countries. An additional 71 million people, concentrated in South Asia and Sub-Saharan Africa, could be pushed into extreme poverty in 2020 as a result of the pandemic.

The rise in socioeconomic inequality represents a real threat to financial stability, both at the macro and microeconomic levels of analysis. In this unprecedented context, social risks can have a significant impact on asset values and thus should increasingly be taken into account by investors. Moody’s estimates that US$8trn of the total debt it rates is subject to material social risks, i.e., four times the amount exposed to climate change risks.

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