Thematic bonds to diversify fiscal sources

Thematic bonds are fixed-income securities that highlight the issuer's environmental and social objectives, commit funds to relevant activities, and are labeled as such. They are subject to the same capital market and financial regulations as other listed fixed-income securities. Most are backed by the full credit of the issuer. While not constituting a new asset class, they appeal to an investor segment interested in generating positive impact alongside financial return, as well as those who incorporate environmental, social and governance factors in investment analysis. These investors manage trillions of dollars and represent a significant source of funding for sovereign debt managers. Many are buy-and-hold investors who react differently to market conditions from others. While there is no difference with conventional bonds from a debt sustainability point of view, thematic bonds allow debt managers to reduce refinancing risk and funding cost by accessing this investor base.