Stockholm (NordSIP) – Sweden’s Sjunde AP-Fonden (AP7) has invested SEK 2 billion (€176 million) in two Green bonds focused on the marine environment. The €115 billion State pension provider announced the new investments on 16 September 2024. The allocation is split equally between bonds issued by the Asian Development Bank (ADB) and the International Finance Corporation (IFC).
AP7 aims to have at least half of its Fixed Income Fund, which is currently worth €115 billion, invested in Green bonds by 2025. It is on track to achieve that goal, with Green bonds currently making up 43% of the portfolio. Ulrika Linden, Senior Portfolio Manager Fixed Income and Green Bonds at AP7 explains the rationale for the latest acquisitions: “Water is one of our main focus areas for our green investments. Cooperation with development banks such as the IFC and ADB is the key to financing climate-related projects where the need and benefits are the greatest. The advantage of investing in green bonds via these development banks is that they bear the credit risk. In this way, AP7 obtains the highest climate impact but with low risk for Swedish pensioners.”
The “Blue” Green bonds are characterised by their stated aim to support water purification and ocean-related projects. Typical of the projects financed by the ADB Blue bonds is one that invests in climate and disaster resilient small-scale water resources (SSWR) management in Bangladesh. This project focuses on flood and drought risk management, drainage improvement, and the modernisation of irrigation systems while enhancing the climate and disaster resilience of SSWR infrastructures and services. The ADB also seeks to help improve agricultural productivity and profitability through effective, participatory, and sustainable SSWR management in the selected project locations.
The new issuance launched on 12 September by the IFC, which is part of the World Bank Group, totals SEK 2.6 billion and is the second green bond that the global development institution has issued in support of its blue finance investments, following a NOK 2 billion green bond issued in March this year in conjunction with World Water Day. “We have seen growing interest in blue finance since IFC published guidelines for blue finance that provide investors with guidance on project eligibility criteria,” said Tom Ceusters, IFC Director for Treasury Capital Markets and Investments. “Funds raised through our Green Bond Programme support investments into blue projects that improve the health of marine ecosystems, provide access to clean water, and strengthen climate resilience.” There was strong interest in the IFC bond from Nordic institutions, with AP2, AP3, The Folksam Group, Handelsbanken Fonder, Länsförsäkringar Liv, LF Västernorrland, National Pension Service, SEB Asset Management, Swedbank Robur, and Skandia joining AP7 in investing in the new Blue bond.
Water was a core component of the Kunming-Montreal Global Biodiversity Framework signed in December 2022 by international parties at COP 15 in Montreal, Canada. The Sixteenth meeting of the Conference of the Parties to the Convention on Biological Diversity (COP 16) will take place in Cali, Colombia between 21 October and 1 November this year.
