Investment: How to invest in the COVID-19 response

Investment: How to invest in the COVID-19 response

Investment is essentially a gamble where instead of guaranteed returns you take a risk in the hope you will earn a lot more than you put in. However, there is also the chance you will end up with less. Popular investments include shares, bonds, funds and property, but there are also other areas you can invest in such as farmland, wine and art. But how can you invest in the COVID-19 response?

The world was plunged into a state of uncertainty as the coronavirus pandemic spread far and wide around the globe earlier this year.

In the UK, the country came to almost a complete standstill when a nationwide lockdown was imposed in March.

Businesses were forced to shut their doors and many workers were left unable to work.

After the Bank of England’s emergency base rate was cut, some top rates started to tumble meaning savers began to earn pitiful returns on their money.

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Both bonds are regulated as instruments subject to the same capital market and financial regulation as other income securities.

These bonds can play a crucial role in the fight against coronavirus and the race to obtain the resulting economic fallout and build resilience to future shocks.

Additionally, direct contributions by Governments and philanthropists, innovative finance mechanisms such as social bonds can be used to fund vaccines and effective treatments responses.

The COVID-19 response bonds are different to investing in companies in sectors such as healthcare, which have helped amid the pandemic.

The proceeds of these bonds are focused on resolving the health crisis and helping sectors and communities suffering from the economic impact.

Many social bonds have been launched by development agencies and other organisations.

The process is similar to a standard bond whereby they ask investors to lend them money in return for a fixed rate of interest over a set period of time, in addition to the return of their original investment in the end.

The £1.5billion Rathbone Ethical Bond fund, managed by Bryn Jones and Noelle Cazalis, has been buying such bonds in order to help fight against the pandemic while adhering to their own ethical investing approach.

How to invest in fighting the spread of coronavirus

These bonds are still relatively limited for personal investors, although investing via a bond fund is a quick and easy option.

Demand for COVID-19 response bonds has surged amid the current market.

It reached $65bn (£51bn) by the end of May and experts believe this figure will continue to rise as this type of investment is less uncertain in terms of credit risk amid these unprecedented and uncertain times,

The bonds are being issued from a range of providers including the World Bank’s International Bank for Reconstruction and Development, to the European Investment Bank.

Morgan Stanley, a combined $32bn (£25bn) of social and sustainability bonds were issued in April, and most were designed for the COVID-19 response initiatives.

The African Development Bank managed to raise $3bn (£2.4bn) in just a few months while the Bank of America came to market last month with a $1bn (£790m) four-year COVID-19 bond, paying a yield of 1.3 percentage points above benchmark treasuries.

Published at Thu, 11 Jun 2020 07:28:00 +0000