Corporate Social Bonds: A Legal Analysis

The article focuses on corporate social bonds, which are commonly defined as debt securities whose proceeds are used to finance projects or ventures at favourable conditions, in order to achieve positive social outcomes or to address specific social issues. Social bonds belong to the family of sustainable finance currently developing on international financial markets, especially in the European Union, and where a recent interest has also emerged at the political level. Although in March 2018 the European Commission published its Action Plan on Financing Sustainable Growth, at the moment of writing there is no specific EU legal framework for social bonds. The absence of a precise definition of social bonds and the uncertainty around the remedies for non-compliance of promised ‘social’ obligations entail serious risks of ‘socialwashing’ (i.e., the misappropriation of an increasingly attractive label).Through an analysis of the contractual design of social bonds, and the identification of different types of social bonds, the article identifies potential legal ‘Achilles heels’ of social bonds and suggests possible contractual remedies to ensure that both issuers and beneficiaries comply with their duties in terms of social impact achievement. Finally, the article suggests a European Union intervention in developing a ‘goal-oriented’ definition for social bonds.