Sweden’s AP2 allocates 1% of portfolio to green bonds in strategic shift

Leading investor redefines green bonds as a separate asset class

Andra AP-fonden (AP2), the SEK300.6bn (€32.4bn) Swedish buffer pension fund has today announced that it will allocate one percent of its total strategic portfolio to green bonds in a move that sees it re-define green bonds as a separate asset class.

AP2 says it marks out a new strategic approach with regard to its investments in sustainability – and a further step to making sustainability an integral part of its asset management.

The fund was one of the first institutional investors to support green bonds back in 2008, and its commitment to the space has grown rapidly, with its green bond allocations increasing by almost 80% in 2015 compared with 2014.

The move means its total current investments in green bonds, which amounts to SEK4.2bn (€0.4bn), will break away from its bond portfolio and be managed with a dedicated investment strategy. The new green bond portfolio will be benchmarked against the Barclays/MSCI Green Bond index.

Lars Lindblom, the AP2 portfolio manager who will be running the assets, said: “The percentage of green bonds featured in the active bond portfolio has risensharply in recent years and we feel that the market has now achieved a maturity and size to justify a separate investment strategy and their definition as an individual asset class… This strategic move offers the fund clear means of combining solid returns with an allocation of resources to the global sustainability challenge.”

“An allocation of resources to the global sustainability challenge”

AP2 recently invested in a $700m green bond issued by the International Finance Corporation and in December it backed an African Development Bank’s $500 green bond.

Also in December, AP2 divested from 28 power utilities over climate and financial risks.

In other green bond news, Kommuninvest, Sweden’s largest municipal lender, recently raised $600m (€528m) with what it says is the largest Nordic green bond to date. And, according to GlobalCapital, Latin American development bank Corporacion Andina de Fomento is planning to debut its first green bond.
AP2 Announcement