Investing in green and social bonds has been an effective and successful way of implementing sustainability aspects in the AP2’s fixed-income management.
AP2 has invested in green bonds since 2008 and made its first investment in a social bond in 2014. These bonds are transparent concerning how liquid funds are invested in projects to promote climate change and address social challenges. As a general rule, these projects are directly connected to at least one of the UN’s Sustainable Development Goals. Green bonds focus primarily on Sustainable Development Goals related to the environment and climate, while social bonds focus on such areas as poverty and equality.
An investment type is deemed appropriate when it is consistent with the Fund’s views on sustainability, portfolio diversity, and long-term investor suitability without compromising the returns. The return we require on green and social bonds in no way differs from other investments, although our preference is a sustainable bond rather than another instrument of similar value. AP2 has allocated three per cent of its strategic portfolio to green bonds.
AP2 is in dialogue with issuers and, as a result, banks have taken an active role in developing the global market for green bonds. Thus the Fund is an attractive participant and speaker at conferences, as well as being a reliable advisor to borrowers.
The first green bonds were issued by the World Bank in 2008. Investments in green bonds mean that institutions (issuers) lend capital to finance climate projects in areas such as energy efficiency, renewable energy and environmental technology, which in turn have positive effects on human health, the climate and the environment.