Labeling Charter School Bonds With Social Tag Comes With Risk.

Charter school bonds are being considered for social labeling, but there are risks associated with this approach. The qualification requirements for social bonds are unclear, and there is no one answer to what qualifies as a social bond. The motivation behind labeling charter school bonds as social is to attract investors and potentially improve pricing. However, this designation can be seen as part of the contentious ESG debate. Labeling a bond as social requires additional disclosure and adherence to the same standards as other disclosures. Moral obligation bonds, which provide a lower cost of capital, are also used to fund charter schools in some states. In 2021, $5.55 billion of bonds were issued for charter schools, but demand has since decreased. [Extracted from the article]

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