Fixed income

Biggest Not Good Enough for SPP’s Lindahl

Stockholm (NordSIP) – Helena Lindahl is Senior Portfolio Manager, in charge of managing the Swedish asset manager SPP’s green bond fund, the biggest such fund in the world in terms of assets under management. NordSIP sat down for an interview with Lindahl to understand why this position does not seem to satisfy her fully.

“This is the 10th anniversary of green bonds,” starts Lindahl, “this concept was invented close to here with Swedish investors, including the AP pension funds and few others. There was a pause during the financial crisis, and then the market caught up in 2011 and 2012 with the UN’s Principles for Responsible Investing (PRI). Eventually, Green bonds took off after the Paris climate agreement. The market has proliferated ever since. Including China, the market is now worth a quarter of a trillion US Dollars.”

Green bonds have a positive momentum, but the concept is far from having reached its full potential. Lindahl continues: “The hope with green bonds was to create a turnkey financial solution to environmental issues. It is a cost-effective way to invest in a sustainable manner.” Large institutions have understood this and have a good appetite for green bonds. However, the appeal is not yet universal. “I see a great parallel with the start of the corporate bond market. It took time for corporate bonds to become an asset class of its own in allocations. Before the market took off, people talked about fixed income portfolios, not corporate bond funds. When funds became available, it enabled a much larger community to invest in this category.”

Lindahl underscores that the change is taking place, just not fast enough. It is not clear to her, why more people aren’t integrating this new category of bonds faster into their portfolios. “All the large Swedish institutions invest in green bonds, but the trusts and foundations have not caught on. When people begin to allocate to a new sector, they want to see history, track records, statistics, they don’t want to invest just because it’s green.” In this case, however, the history of the existing corporate bonds market should suffice. Green bonds have the same legal framework and mechanisms as similar bonds that are not green. The market is the same and liquidity is equivalent. The only difference is that these bonds’ proceeds have been earmarked to finance projects with a positive impact on the environment. “The risk/return of these bonds is the same, if not better than other bonds on the risk side. Purely from a fiduciary duty perspective, institutions should allocate more to green bonds.”

Lindahl’s dissatisfaction with her fund size becomes clear: “If green bonds are to save the world, being the largest fund with $350 million is not going to do it.” SPP faces competition from green bond funds at the largest asset management houses such as Blackrock and Pimco, and yet it is still the largest. “If they had set up their mind to push this kind of product really,” says Lindahl, “we would be by far the smallest. The elephant is in the room, but the elephants aren’t here.”


Picture (c) – SPP Storebrand

Kames Capital


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