Investors Feel Good About Covid Bonds

One theory of finance is that certain projects are beneficial for society, and if you come up with one of those projects then you can go to the capital markets and seek financing for those projects, and investors say “this project sounds beneficial for society so I will give you money,” and you raise the money and do the project, and it benefits society, and so you get lots of money, because money is the way that we keep score of how much you have benefited society,1 and you give some of the money to your investors to reward them for doing the socially beneficial job of financing your socially beneficial project.

This theory is called “capitalism,” and it is wildly popular in certain circles. Investors, for instance, love it, and there are hedge fund managers who will happily talk about how they improve the world by allocating capital to good projects. Investment bankers tend to love it even more; when you think about it, isn’t structuring derivatives to hedge a biotech company’s capital raise basically the same thing as curing cancer yourself?