APG invests €360m in Spanish and UK green sovereign bonds

Dutch pension fund APG has invested a total of €360m in new green sovereign bonds on behalf of its members.

The scheme invested €99m in the Spanish bond and €261m in the UK bond.

This brings APG's total investment in green, social and sustainability bonds to €12.2bn, €3.9bn of which is in sovereign bonds.

These two newcomers follow a trend of European nations issuing green bonds, with Sweden, Germany and Italy also issuing green bonds in 2020 and 2021.

Green bonds are issued by companies, governments and government-related entities to fund climate-related or environmental projects.

Appetite for green bonds has been strong, with the €5bn Spanish issue being 12 times oversubscribed and the GBP 10bn UK bond being around 10 times oversubscribed.

Spain's sovereign green bond framework outlines seven eligible categories to which Spain’s green bond proceeds could be allocated: renewable energy, clean transportation, energy efficiency, sustainable water and wastewater management, biodiversity and natural resources, pollution prevention, and adaptation to climate change.

Both nation's bonds are aligned with the ICMA's Green Bond Principles, although the UK's is one grade lower on its contribution to sustainability compared to Spain's.

"One advantage of sovereign and government-related issues is that they give investors the opportunity to invest in large public infrastructure projects that have a direct impact; projects where it is more difficult to gain exposure via the corporate bond market, for example," APG stated.

"As a result, these new green bond investments help contribute to our pension fund clients’ ambitions as long-term responsible investors."

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