Socialium or the Financial Price of Social Responsibility

Abstract

We investigate whether investors are willing to pay a higher price to invest in social projects, a differential that we call socialium. Using a
nearest neighbor matching procedure on various samples of social and conventional bonds issued between 2015 and 2020, by public or transnational
organisations, we find no yield and spread differential in the primary market. However, rebalancing the portfolios by replacing seasoned conventional bonds with social bonds could result in a socialium in the secondary market. We show that, over long run, market liquidity or shocks linked to political and economic uncertainty, likely to address silent issues of social risks, do not lead to a statistically significant negative premium. Our empirical results provide us with a rare opportunity to bridge two streams of reasoning stemming from the financial and sociological approaches. We explain why issuers and investors still bear an interest for social bonds through the lens of new institutionalism. This theory illustrates how the social influences, institutional and mimetic pressures and the acquisition of legitimacy in the eyes of society and stakeholders influence the issuance and acceptance of social bonds.