Kåpan Tjänstepension, the Swedish pension fund for government employees with an investment portfolio of SEK165bn (€15bn), has invested SEK500m in a new sustainable bond issued by the United Nations’ International Fund for Agricultural Development (IFAD).
The proceeds of the issuance – SEK900m in total – will be used to finance IFAD’s development projects throughout the world, aimed at transforming rural areas to become more productive and prosperous.
The balance of SEK400m was taken by Swedish insurer Skandia, with SEB as the sole arranger.
The bond represents Kåpan’s first venture into impact investing in sustainable development in the fixed income space.
“We are looking to expand our investments in the field of sustainable bonds, although we don’t yet have a target allocation,” Marie Giertz, chief executive officer of Kåpan, told IPE.
“The investment will add diversification and a new type of bond for us, among other things. And we find IFAD an attractive issuer.”
She said Kåpan’s first investment in IFAD’s funding programme, alongside a strong credit rating, offers the fund clear sustainable development impact.
“Given our long-term investment horizon, we are expecting about the same return as the coupon, which is around 3%, and for generally small risks,” she added.
The bond, which matures in January 2032, will be included in Kåpan’s green portfolio, which makes up around 20% of its fixed income portfolio.
As a whole, Kåpan integrates a number of sustainability indicators into its investment process, contributing to investments that promote environmental and social characteristics.
The fundamental principle is that the companies in which it invests respect international norms and conventions. Investments should, as far as possible, have a strong sustainability profile.
The pension fund applies a set of exclusion criteria to minimise the risk of investments causing negative impacts on the surrounding environment.
Meanwhile, IFAD – which has an AA+ rating from Fitch and Standard & Poor’s – has now issued the equivalent of $794m in sustainable bonds, with varying coupons and durations, through 10 private placements.
All these bonds are listed on the London Stock Exchange Sustainable Market and on the Green Segment of the Luxembourg Stock Exchange.
No comments yet