Dutch pension fund ABP invests €160m in EU green bond

ABP, the pension fund for government and education sector employees in the Netherlands, has invested €160m in the European Union’s (EU) first ever green bond programme.

The proceeds will be allocated to EU member states in the form of grants and loans and are intended to be used to aid a sustainable post-pandemic recovery for the entire European economy.

Investors will buy debt securities from the EU while interest is paid on the loans. The transaction is a key part of the region’s recovery plan and an important step in making the economy more sustainable.

The EU has set itself the target of becoming the first climate-neutral bloc by 2030, which would see greenhouse gas emissions rates up to 55 per cent lower than in 1990.

Government bonds can be a key investment for pension fund portfolios due to their stability and long-term structure, as they fit obligations pension schemes have to their members.

According to ABP, the fund intends to apply the same level of return, risk and costs to the vehicle as it would for all its other investments.

At the end of 2020, ABP had invested €8bn in green bonds, while the wider Netherlands region has been issuing green debt since 2019.

The wider EU green bond issuance program, launched yesterday, saw €12bn of 15-year debt sold with more than €135bn in orders, making it the largest green bond deal to date.

The deal comes as Europe continues its effort to tackle an energy shortage crisis.
Member states receiving capital are obliged to submit green recovery plans to the European Commission for approval.

The commission also monitors how the proceeds are spent.

In a statement issued yesterday by the European Commission (EC), EC commissioner in charge of budget and administration, Johannes Hahn, said: “Today's issuance is a strong start for the NextGenerationEU green bond programme. Set to turn the EU into the world's biggest green bond issuer, it is a powerful signal of the EU's commitment to sustainability.

"Our future is green and it is extremely important that we seize the opportunity to clearly show to investors that their funds will be used to finance a sustainable European recovery.”

The European fund for economic recovery following the coronavirus pandemic is worth almost €800bn, and is largely financed by the issuance of green bonds.

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