APG invests part of the pension capital we manage in bonds. And these come in different shapes and sizes. From government bonds to actual COVID-19 bonds. There is quite a lot we can tell you about bonds. And that is exactly what we will do here.

Long-term investment
Collection Contents
13 Publications

2021: the year of sustainable high yield

Published on: 28 December 2021

Up until very recently, the labeled bond market was the domain of larger issuers with better credit ratings. But now the market for sustainable high yield is really taking off. More high yield companies are looking to the labeled bond market to showcase their sustainability efforts. Is this an encouraging development or does it open the door to greenwashing? APG is enthusiastic but remains selective in its approach. “Our aim is to ensure there is transparency, accountability and true impact.”


As recently as a year ago, there were very few labeled high yield bonds outstanding. “But as the long-term performance benefits of incorporating ESG factors into business operations become clearer, more companies are now looking to the labeled bond market to showcase their sustainability efforts,” says US Credit analyst Joshua Linder. In 2021 to date, over 60 high yield labeled bonds were issued in Europe and the US. It is an indication that the high yield labeled bond market – including green, social and sustainable bonds as well as sustainability-linked bonds - is really taking off.


High yield companies increasingly issue bonds with a sustainable label 

In the low-yield environment of recent years, the high yield bond segment has offered attractive returns and important diversification benefits. High yield bonds pay investors a higher level of interest to compensate for a higher degree of risk. In 2021, an increasing number of high yield companies have sought to attach environmental, social or governance (ESG) ambitions to their financing by issuing bonds with a sustainable label, says Sven Smit, who manages a portfolio with euro-denominated high yield bonds. “The labeled bond market has ceased to be the almost exclusive domain of larger issuers with better credit ratings.”  


As an active investor in labeled bonds and major participant in the high yield bond market, APG is enthusiastic about these developments. “But we are also selective in our approach,” says Linder. “There are no short cuts. We thoroughly research every labeled bond deal and issuing company in order to avoid greenwashing.”


Sustainability-linked is the label of choice in high yield

Research published by Deutsche Bank suggests that labeled bonds now account for around €45 billion or around 9% of the European high yield market (including financials). While US dollar issuance so far this year is around $21 billion, a little over 4% of total 2021 issuance according to JP Morgan. Smit: “Diversity is also improving with healthcare, industrials and manufacturing, representing roughly 40% of outstanding labeled bonds in Europe.” About one third are green bonds and the rest are social, sustainability or sustainability-linked bonds (SLBs). “In the US high yield market, we see a nice mix of issuers across sectors with about 30% opting for the SLB structure,” says Linder.


But why the relatively high percentage of SLBs in high yield? “Basically, it is because the structure of an SLB is often a better choice for a smaller company and high yield issuers tend to be smaller,” explains Smit. Labeled bonds can be divided into two basic categories. There are those with a structure that earmark the funds raised by the bond issue for specific pre-determined projects. Green and social bonds, for example, fall into this category. The other structure, of which SLBs are the most popular form, enable companies to align issuance with their overall corporate sustainability strategy, by setting sustainability targets in the form of key performance indicators. “This is often a better fit for a high yield company with ambitions to improve on sustainability but too small to be able to raise funds via a bond to finance specific green projects,” Smit concludes.


Alert to greenwashing, but proactive in financing change

APG has strict internal guidelines for all labeled bond investments, but is there more risk of green washing with high yield issues? “We evaluate all labeled ESG bonds in the same way across different parts of the bond market. Our aim is to ensure there is transparency, accountability and true impact,” says Linder. “In that sense, for us the risks associated with high yield are not greater.” However, although the structure of SLBs ensures issuers are penalized with higher interest costs if they fail to deliver on their KPIs, having less oversight on what the money is actually being spent on does increase the potential for greenwashing in general. “It’s a sort of balancing act,” explains Linder “We have to remain extra vigilant around these SLB deals, but the flip side is that this gives us a golden opportunity to help companies make progress on their transition strategies. As a leader in responsible investing, we also have an important role to play in helping maintain the integrity of the market.”


In 2021 to date, in European high yield, APG has participated in 12 out of 16 SLBs and 9 out of 24 green bonds that were issued. In the US there have been around 23 developed market labeled bond deals so far this year and APG has participated in 8 of them (5 green, 2 SLB, and 1 social). “Although we passed on some of the bond issues for portfolio and valuation reasons, there were also a number that did not fulfill our requirements in terms of the issuer’s bond framework, the bond’s structure or the KPI targets,” explains Smit. “When this happens, we try to be clear to the issuer about why the bond doesn’t meet our standards and what our expectations are so that in future improvements can be made.”


Joining with other stakeholders to help companies raise the bar

There are various reasons why issues may not fulfill APG’s investment criteria from a sustainability perspective. Smit: “For example, we passed on a green bond issued by an industrial and energy company because the money being raised was earmarked to refinance an earlier ‘grey’ bond issue rather than for any green project purposes”. APG also chose not to invest in a SLB from a US telecom issuer because one of the KPI targets it set for the bond had already been achieved. “This undermines the intent and purpose of the SLB market which should be forward looking in nature and stimulate sustainability ambitions,” says Linder.


APG also invests time in helping companies work towards a credible sustainable issue often together with the banks who arrange the financing. “For a US company in the financial services industry, we engaged with the management team for over a year, helping the issuer develop a comprehensive social bond framework,” says Linder. “We were then delighted to be able to invest in the resulting bond issue, which targeted improving access to responsible financial products and services for vulnerable and/or underserved populations.”


Looking ahead – challenges and opportunities

 Although this market is rapidly gaining momentum, there are still challenges ahead. “Further fragmentation as a result of new ‘flavors’ or bond structures is a cause for concern,” explains Smit. “If new product types are not well regulated with rigorous reporting standards, they open the door to greenwashing. Having too many labels can also damage the credibility of the market as a whole.” Another issue to be wary of is the fact that high yield bond structures often offer the issuer an option to refinance early. If this call date occurs before the KPIs have to be achieved, it obviously defeats the object of having targets.


But overall, the prospects look bright. The combined benefits of attractive returns and an increasing focus on sustainability in high yield, will further boost investor demand. Linder: “What’s more, companies that issue labeled bonds to finance sustainability improvements can inspire their peers to do the same, helping to raise the bar for ESG performance and governance for high yield bond issuers across the board.”

Volgende publicatie:
APG invests €195 million in first EU green bond

APG invests €195 million in first EU green bond

Published on: 12 October 2021

EU further strengthens its position as sustainable finance leader

The EU has issued its first green bond. The proceeds will be used to finance the economic recovery in the wake of the Covid-19 pandemic. “As a committed labeled bond investor, APG is enthusiastic about participating on behalf of our clients in the EU’s long-awaited debut issue”, says treasuries portfolio manager Chris Lam. APG has been allocated €195 million in EU green bonds.

This inaugural NextGeneration EU (NGEU) green bond is part of a large economic recovery package (worth around €800 billion) to support EU member states in tackling the consequences of Covid-19. Around 30% of the funding is earmarked for green bonds and will focus on environmental and climate-related investment. According to Oscar Jansen, who manages a portfolio of euro-denominated credits, this week’s €12 billion inaugural issue is just the first step on a path which will establish the EU as the world’s largest green bond issuer. “It underscores Europe’s leading position in sustainable finance”. In 2020, APG already invested in the

EU’s SURE social bond, the proceeds of which help reduce the negative social impact of the pandemic.


Supporting member states’ sustainable recovery

According to Lam, this event is a milestone for both Europe and the green bond market. “This issue will give investors unprecedented access to financing green projects across a range of countries that will help the EU achieve its ambitious climate goals. Energy-efficient infrastructure and transportation, and renewable energy investments will help rebuild post-Covid Europe and reduce greenhouse gas emissions. But there will also be funding available to stimulate innovation and finance research to aid green transition”. 


The EU’s green bond framework has been drawn up in alignment with the market standard – the International Capital Markets Association’s green bond principles – and positively assessed by second-opinion provider, Vigeo Eiris. It identifies nine investment categories in which it will finance green investments and reforms via its member states recovery and resilience plans.

Solid framework, monitoring and reporting to mitigate risk of greenwashing

As instigator of the EU Taxonomy – a classification system for environmentally sustainable investments – and the soon-to-be-implemented EU Green Bond Standard, the EU has blazed a trail for establishing a regulatory framework for sustainable investments and for measuring their impact across a range of industries. In the case of this issue, where individual countries will submit plans showing how they intend to allocate funds, ensuring transparency and monitoring how the proceeds are actually used will require substantial oversight at EU level. The allocation reporting will be verified by an external auditor and environmental impact will be measured according to standard climate impact reporting metrics.

Jansen is not unduly concerned about greenwashing. “With the solid regulatory structure the EU is building and the emphasis on the ‘Do no significant harm’ criteria for investments, there is a strong focus on ensuring that the proceeds of this bond will be used for truly green investments,” he says. “The diversity in the potential use of proceeds in an issue like this enables us to maintain a broader and more diversified exposure to a variety of green investments. Boosting the demonstrable impact of our portfolios is a crucial part of ensuring that our pension fund clients meet their ambitious responsible investment goals.”

APG is one of the world’s largest labeled bond investors and committed to supporting this market’s growth and development. At the end of last year, APG organized a webinar where representatives from the investment world and the EU examined the planned support program, its potential impact on the labelled bond markets and the important role investors have to play.


At the end of 2020, we had invested €12.2 billion in green, social and sustainability bonds on behalf of our pension fund clients. Our APG Guidelines for Green, Social and Sustainable bonds explain more about our policy for investing in labeled bonds. 

Volgende publicatie:
APG invests €360 million in Spanish and UK green sovereign bonds

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

Published on: 22 September 2021

The growth of Europe’s sovereign green bond market continues unabated as, within the space of two weeks, two relative latecomers, Spain and the UK swell the ranks of sovereign issuers. APG has invested in both of these latest new issues on behalf of its pension fund clients, receiving an allocation of €99 million in the Spanish bond and £224 million (approximately €261 million) in the UK’s issue.


In 2020 and 2021 so far, European sovereigns Sweden, Germany and Italy have all issued inaugural green bonds and with the first green issue from the Next Generation EU (NGEU) fund penciled in for October, existing issuance records look set to be broken.



Green bonds are issued by companies, governments and government-related entities to fund climate-related or environmental projects. Their transparent use-of-proceeds structure makes them appealing to investors as you can more easily assess the impact your investment has. Europe is at the forefront on regulation and reporting on green investments and the EU taxonomy that is currently being implemented will raise the bar still higher. The labeled-bond market’s popularity is underscored by the investor appetite for these new issues. The € 5 billion Spanish issue was 12 times oversubscribed and the UK’s £10 billion green gilt around 10 times.


Spanish inaugural issue supported by strong green-bond framework

Spain has committed to ambitious climate and energy targets in terms of emission reductions, renewable energy, energy efficiency and enhancing climate resilience. According to second- opinion provider Vigeo Eiris, bonds issued under the Spanish sovereign green bond framework will make an ‘advanced’ contribution to sustainability, the highest score on VE’s four-point scale. The country’s framework is also aligned with the four core components of the ICMA’s Green Bonds Principles and best practice as identified by VE.


According to the framework, there are seven eligible categories to which Spain’s green bond proceeds could be allocated. These are renewable energy, clean transportation, energy efficiency, sustainable water and wastewater management, biodiversity and natural resources, pollution prevention, and adaptation to climate change. The lion’s share of the proceeds is likely to be earmarked for clean transportation. These are focused on improvements to the national railway system and investments in railway infrastructure, promoting the shift towards a clean transportation system.


The first sterling-denominated green government bond

This first sovereign issue will be a shot in the arm for the sterling sustainable fixed income market. In April, the UK government set an ambitious target to cut emissions by 78% by 2035 compared to 1990 levels. The categories to which the UK bond’s proceeds will be allocated closely mirror those of the Spanish bond. The largest sum will also be allocated to financing clean transportation, for example, by funding plans to decarbonize the UK’s bus fleet with 4,000 new zero-emission buses.


The UK’s green-bond framework is also aligned with the Green Bond Principles but scores one grade lower on its contribution to sustainability than the Spanish framework (robust instead of advanced). In its second opinion, VE also indicates some areas for improvement, for example, in the categories relating to pollution prevention and control, energy efficiency, and living and natural resources. These three areas are relatively small in terms of the percentage of funds to be allocated. However, APG has raised some questions with the UK Treasury on the first of these categories where proceeds are earmarked for carbon capture, usage and storage. CCUS qualifies as an EU-taxonomy eligible sector and does have a role to play in the energy transition, but the UK green bond framework currently lacks clarity on industries and thresholds. As is the case for all our green bonds, APG will follow-up on this issue, critically assess the allocation report, which also contains material developments relating to eligible green expenditure, and ensure that the bond continues to fulfill the APG Guidelines for Green, Social and Sustainable bonds.


Green bonds are an effective tool to contribute to sustainability ambitions

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. As a result, these new green bond investments help contribute to our pension fund clients’ ambitions as long-term responsible investors. Both ABP and bpfBOUW, APG’s two largest clients, have set ambitious targets to increase the percentage of assets they invest in companies or projects that contribute to the UN’s Sustainable Development Goals (SDGs) by 2025.


Major player in the sustainable bond markets

APG is one of the world’s largest labeled bond investors. At the end of 2020, APG had invested €12.2 billion in labeled bonds (green, social and sustainability bonds) on behalf of our pension fund clients, €3.9 billion of which was in sovereign bonds. In late 2020, APG invested in the EU’s SURE inaugural social bond, the proceeds of which are being used to reduce the negative social impact of the Covid pandemic.

Volgende publicatie:
Sustainability-linked bonds: new opportunities, but avoid greenwashing

Sustainability-linked bonds: new opportunities, but avoid greenwashing

Published on: 9 July 2021

APG recently participated in the issue of a number of sustainability-linked bonds (SLBs). Companies issuing such bonds promise to meet predefined sustainability objectives; if they fail to do so, they need to pay investors extra interest. This offers flexibility, but also means investors must pay close attention to the sustainable objectives to prevent greenwashing. “We need to do our homework thoroughly to weigh the credibility and robustness of these deals.”


Tesco is one of the growing number of companies to have issued a ‘sustainability-linked bond’ (SLB) this year. In January, the British supermarket chain launched a bond that is linked to the company’s commitment to reduce greenhouse gas emissions. Concretely, Tesco pledges to cut its greenhouse gas emissions by 60% in 2025 (compared to 2015). If the company fails to meet this objective, investors will receive a coupon premium.    

Rapid growth

APG on behalf of its pension funds participated in Tesco’s €750 million SLB issuance, the first of its kind by a retailer. So far, SLBs remain a small part of the ESG fixed income landscape, relative to conventional labeled (green, social and sustainable) bonds. But SLB issuance is growing fast in 2021. According to Bloomberg, over €12 billion of SLBs has been issued this year to date, nearly 5% of total labeled bond issuance in that period.

So what is a sustainability-linked bond? SLBs allow the issuer to raise money for general purposes while promising that if they fail to meet specified sustainability targets they pay investors extra interest. Such key performance indicators (KPIs) are, for example, ‘percentage of recycled materials used by 2030’ or ‘reduction of greenhouse gas emissions by 2025’. This is different from conventional green bonds, where the money raised has to be spent on specific sustainability projects.

The instrument is still fairly new. In 2019, Enel issued the first SLB. The Italian power utility company targeted a 55% share of renewables in its power generation capacity by the end of 2021. Investors will receive 0.25% extra interest on their bond holdings if Enel fails to meet this commitment. In the run-up to the issue, Enel discussed the particular features of this bond with a select number of investors, including APG.

Prevent green washing

Since mid-2020, the number of SLB issuances has been steadily rising, an encouraging sign of momentum in this nascent market. The flexible structure of SLBs may offer an alternative for companies which – owing to the nature of their business – face difficulty in finding sufficient (or sufficiently large) sustainability projects to issue a green bond. Retail companies, like Tesco, are an example. SLBs allow such companies to finance their overall sustainability strategy without having to ringfence the money for particular green projects, e.g. building a solar power plant.

However, that same flexibility also means that investors have less concrete information on how the proceeds will be used and the potential impact they will have. “Flexibility in terms of use of proceeds combined with customized key performance indicators could make it easier for issuers to ‘sustainability wash’ and twist objectives to suit their needs,” says Joshua Linder, Credit analyst Fixed Income at APG. “For that reason, some investors are hesitant to support this new structure. But we see a lot of potential for SLBs, provided the integrity of the market is firmly maintained. We need to carefully scrutinize the KPIs to find out if they are ambitious and robust enough and ensure they can be properly verified and tracked.”

Tesco’s SLB is aligned to its newly introduced Sustainability Bond Framework which, in turn, follows the International Capital Market Association (ICMA) principles on SLBs, released in June 2020. The ICMA principles aim to further develop the key role that debt markets can play in funding and encouraging companies to contribute to sustainability. The principles pertain to setting KPIs, bond characteristics, reporting and independent verification.

Hybrid bond

Recently, APG also participated in a ‘hybrid’ bond issued by NextEra Energy. This bond, one of the first of its kind, combines features of both conventional green bonds and SLBs. NextEra Energy is a US utility holding company overseeing the largest investor-owned utility in the United States, which serves more than 11 million residents across the state of Florida. NextEra Energy also owns a clean energy business, which is the world's largest generator of wind and solar energy.

The bond structure follows the ICMA green bond principles and ringfences the bond’s proceeds for specific renewable energy projects. However, it is also stipulated that if the company fails to fully allocate the proceeds within two years, investors will receive a 0.25% interest premium until maturity. Also, projects must become operational within twelve months after issuance, or replacement projects must be selected that still meet the two year window, or be subject to the higher coupon rate.

“These features create an added layer of accountability compared to conventional green bonds,” says Craig Hauret, Senior Credit analyst Fixed Income at APG . “It ensures proceeds are allocated to eligible green projects in a timely fashion. Another attractive feature is the requirement that proceeds finance only wind and solar energy projects that will become operational after issuance. As opposed to some green bonds which allocate proceeds to ‘refinance’ projects that were completed two or three years ago.”

This is not to say there aren’t any drawbacks to the deal, notably the absence of a green bond framework which typically serves as the basis for project eligibility, as well as the lack of independent audit. “We have communicated that concern to the company,” says Hauret. “However, we have confidence in NextEra due to its long-time status as an ESG leader, combined with the transparency into the specific renewable energy projects being financed.”  

Upholding market integrity

APG is one of the world’s largest green, social and sustainable bond investors and an advocate of the labeled bond market, including SLBs. “We are, however, very selective in terms of which SLB deals we support in these early stages of market development in order to uphold market integrity,” says Linder. “For instance, we have seen SLB issuance where one of the sustainability targets had already been achieved. Clearly, such a bond does not meet our standards.”

The need for transparency and effective reporting practices is crucial for upholding the integrity and credibility of this rapidly growing market. To make (potential) issuers aware of our expectations and foster healthy development of the market, APG has published the Guidance on Sustainability-Linked Bonds.


APG’s fourth annual ‘Growing the US Corporate Green and Social Bond Market’ roundtable event for institutional investors, capital market underwriters and other stakeholders this year focused on SLBs.  “Growing the corporate labeled market in the US whilst upholding market integrity has been a key objective since we started these events, “ says Anna Pot, Head of Responsible Investments Americas at APG. “We have made substantial progress on activating our peers and partners across the industry to stimulate issuance of high-quality corporate labeled bonds.”

Volgende publicatie:
Is the growing popularity of investing creating a new 'bubble'?

Is the growing popularity of investing creating a new 'bubble'?

Published on: 8 July 2021

Current issues in the fields of the economy, (responsible) investment, pension and income: every week, an APG expert provides a clear answer to the question of the week. This time: Chief Economist Thijs Knaap on the risk of a (bursting) bubble due to the rising popularity of investing.


Investing is hot. In 2020, the number of Dutch people investing money increased by more than a quarter. That's the biggest increase since the 1990s. Many young, often inexperienced investors enter the stock market via smartphone apps from online brokers. And that is not without risk, according to some. Such as American top investor Jeremy Grantham. Earlier this year, he stated: "Private investors have created a historic bubble that is likely to burst before May." A bubble like at the turn of the century (the dot com bubble), when private investors massively invested in Internet companies, pushing stock prices to record highs. Until prices suddenly collapsed in 2000, which was followed by a slowdown of global economic growth. Although May is behind us, the question remains: is the chance of such a bursting bubble still real?


Permanent effects

Thijs Knaap is cautious with terms such as bubble. "Before you use a word like that, you have to understand what causes the increase in retail investors (private investors, ed.). It's down to three factors. First of all, the possibilities for private individuals to invest 'just for a while' have increased, both in terms of convenience (via simple and handy apps) and in terms of costs (in the Netherlands, you also have parties where you can conclude transactions free of charge). The second factor is the corona pandemic: people are at home, sometimes have money to spare and the time to do something with it. So they started investing. The third reason for the growing popularity is the low, sometimes even negative, interest rates. Since July 1, you have to pay some of the banks to be able to save. That drives people to the market. Some of these factors will remain with us for a while – or for good. That technology, that low-threshold investment, is not going away. The low savings interest is also likely to stay with us in the coming years. The demand for stocks therefore continues to grow. These are permanent effects, so in that respect there seems to be no question of a boom, with everyone getting out en masse after corona and never coming back. Structural changes explain a larger part of the movement."


Other types of investors

However, according to Knaap, that's not the end of the matter. "Individuals are different from large investors. They tend to take more risks. They often buy individual stocks, for instance, and don't have a diversified portfolio. And call options are popular, which quickly increase in value when the stock goes up, but are worth nothing when the stock goes down. When you get these kinds of investors, all kinds of things happen. Especially in a time when people find each other on Internet forums where they can arrange to buy stocks of a particular company en masse to raise the price. Even if the company isn't really worth it. It happened this year with the loss-making GameStop and the bankrupt Hertz. By joining forces, hundreds of thousands of investors managed to increase the price to an extreme. That's problematic, and it's not even permitted. In fact, it's market fraud, but you try and do something about it with some many people behind it."

It's much harder to blow up the entire market

Continued confidence

Individuals egging each other on, stock prices being pushed up when the company doesn't seem worth much; are these the typical bubbles we're concerned about? "The developments surrounding these investments – also referred to as meme stocks – do indeed have the characteristics of a bubble", says Knaap. "But that doesn't entirely hold true. During the dot com crisis, stock prices eventually plummeted completely when a lot of people got out. At both GameStop and Hertz, the value of the stock is still and consistently much higher than it was in the beginning. So people seem to have real confidence that the company is doing something good with it. And the suddenly low-cost financing also gives the company the opportunity to reinvent itself."


Blow up the market

Back to the question: due to the growing popularity of investing, are we heading (again) towards a bubble that is about to burst? Knaap doesn't think so. Although he emphasizes that you can never be 100% certain. "Sure, in the examples given and in some sectors, private individuals can drive up the price. But only for companies that are relatively small. They only form a limited part of the stock exchange. You don't see it in the rest of the market. It's much harder to blow up the entire market."

Volgende publicatie:
“Will the computer chip shortage lead to inflation?”

“Will the computer chip shortage lead to inflation?”

Published on: 17 June 2021

Current issues in the fields of economics, (sustainable) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap, about the economic consequences of the worldwide shortage of computer chips.


“The simplest and most immediate effect is that chip machine manufacturers are doing well. As of the end of October, ASML’s share price has now risen by 85 percent, while the AEX has risen ‘only’ 37 percent over that period. But of course, this will not continue. For an investor in chip machine manufacturers, it is helpful to know that the demand for chip machines has some of the same characteristics as the hog cycle. When the demand for pork chops - and therefore the price - is high, hog farmers expand. On the other hand, when that new meat comes onto the market, there is immediate excess, which then brings the price down. The same is true of the market for chip machines. As with pig farmers, it takes a while for new supply to be created. This carries the risk that in a few years there will be a surplus of chip machines and chips. An investor in chip machine manufacturers must therefore know exactly when to stop.”

The indirect effect of the chip shortage is much greater, Knaap explains. “You can’t think of anything without a chip in it nowadays. The shortage is a well-known bottleneck for car manufacturers, but it is currently affecting the entire supply industry. When it doesn’t get enough chips, it also leads to a shortage of other parts. There is a risk that the Western economies will stall because of this shortage.

Everything is expensive now, not only chips but also oil. If the prices of many components and semi-finished goods go up, in the worst-case scenario a situation similar to the oil shocks of the 1970s will arise. The big question hanging over the market is: will it lead to inflation? That is the fear of many investors. Central banks are now pursuing a loose monetary policy by buying up government bonds and corporate bonds, among other things. This is good for investors, because it pushes up the prices of bonds and shares. But if inflation does occur, central banks lose the excuse to pursue this broad monetary policy. They must then stop buying bonds and in that case the mechanism works the other way round. The chance for stock markets to fall increases and, because the current monetary policy has been pursued since 2008, you could even see a major correction. It may be a bit of a shock to investors.”

Crypto currency
The main cause of the worldwide shortage of chips was the extremely high demand caused by the Covid-19 pandemic. Working from home, and the increased demand for game consoles in particular, played a role in this. Still, according to Knaap, that’s not the whole story. “The demand for chips has also increased due to the increased popularity of crypto currencies. A lot of chips are needed to mine bitcoins. And there is also a lot going on on the supply side. In the early 2020s, many companies in Asia were at a standstill due to lockdowns. You can still see that in the availability of goods, including chips. Plus, Covid-19 made us ask ourselves whether we want to be so dependent on foreign producers for certain products - mouthguards, medical equipment, and so on. The answer is no. There will be more production in Europe and the US again, rather than in China. That’s good for our independence. But it does mean that everything will become more expensive.”

Volgende publicatie:
APG develops guidance for Covid-19 response bonds

APG develops guidance for Covid-19 response bonds

Published on: 13 May 2020

APG has published a guidance document that outlines its expectations about Covid 19-related expenses by companies and their potential eligibility in social or sustainable bonds.


An increasing number of banks, companies and government-related agencies have recently issued so-called Covid-19 response bonds. The proceeds of these are used, among other things, to fund emergency health measures and support packages for small and medium-sized enterprises. APG, on behalf of its pension fund clients, has since late March invested over €350 million in Covid-19 response bonds.


“For corporate issuers it is not always clear which Covid 19-related activities should qualify for labeled bond issuance”, says Joshua Linder, credit analyst Fixed Income at APG Asset Management. “To remove some of the uncertainty, we have devloped a guidance document that outlines how we think about measures in the context of social and sustainable bond issuance. We think it is helpful to identify examples of activities across sectors that could potentially qualify.”


APG’s goal is to share the guidelines with its counterparts to encourage greater issuance while upholding the integrity of the market. As a leading long-term responsible investor, APG actively contributes to initiatives aimed at expanding the size and scope of the green bond market. At the same time, we continue to emphasize high-quality standards and transparency in support of responsible, sustainable growth.

Volgende publicatie:
APG invests nearly €350 million in Covid-19 response bonds

APG invests nearly €350 million in Covid-19 response bonds

Published on: 22 April 2020

APG has recently raised investments in Covid-19 response bonds to almost €350 million. The proceeds of these ‘corona bonds’ are used, among other things, to fund emergency health measures and support packages for small and medium-sized enterprises in Europe and elsewhere.


Fight the pandemic ánd its impact


APG – on behalf of ABP, bpfBOUW, SPW and PPF APG – recently participated in the issue of corona  bonds by the World Bank (IBRD; €211 million). The proceeds of this bond contribute to a €13 billion emergency package to support middle income countries severely affected by the corona pandemic. Among other things, funding will be used to expand test capacity, train medical personnel and procure protective medical equipment.


In addition, APG recently purchased corona bonds issued by the Inter-American Development Bank (IADB; €14 million) and the United Services Automobile Association (USAA; €32 million), an organization that offers affordable insurance and banking services to US defense personnel. The proceeds are used, among other things, to support military personnel and their families who have run into financial problems, for example by fee waivers and mortgage payment deferrals.


Emergency measures


On March 31, the Nordic Investment Bank issued the first bond specifically intended to combat the Covid-19 pandemic and its impact. Other agencies soon followed, such as the Council of Europe Development Bank and the European Investment Bank. The proceeds of these bonds are earmarked for financing of a range of emergency measures, including expansion of healthcare services, support to small and medium-sized enterprises (SME’s), as well as a temporary increase in social security expenditures.


All the above-mentioned bonds are issued by reputable institutions rated AA or AAA. The credit risk associated with AAA-bonds is comparable to the risk of Dutch sovereign bonds, while the coupon rate is slightly higher compared to similar bonds.


Responsible investor


It is good that institutions issue special corona bonds, says Oscar Jansen, Credit specialist at APG Asset Management. “The societal and economic impact of the virus is huge and a lot of money is needed to fight the crisis. As a responsible investor, we want to play an active role in this.”


APG is one of the world’s largest green bond investors. These are bonds issued by companies or (semi-) governments to finance green, social or sustainable projects. By the end of 2019, we had invested over €9 billion in green, sustainable and social bonds. These investments also contribute to our clients’ ambitions in the area of sustainable investment, in particular the aims of ABP (20% of AUM in the Sustainable Development Goals by 2025) and bpfBOUW (€12 billion by the end of 2020).

Volgende publicatie:
APG invests € 90 million in Covid-19 response bonds

APG invests € 90 million in Covid-19 response bonds

Published on: 9 April 2020

To combat the corona pandemic and its socio-economic impact, APG on behalf of its pension fund clients has invested nearly € 90 million in Covid-19 response bonds. The proceeds of these ‘corona bonds’ are used, among other things, to finance emergency health measures and support packages for small and medium-sized enterprises.

Since late March, APG – on behalf of ABP, bpfBOUW, SPW and PPF APG – has participated in the issue of corona bonds by the Nordic Investment Bank (€16 million), European Investment Bank (€39 million) and Council of Europe Development Bank (€34 million). In all three cases, investor demand considerably exceeded the amount of the issue.


Emergency measures

The proceeds of corona bonds are earmarked for financing of a range of emergency measures, including expansion of healthcare services, support to small and medium-sized enterprises (SME’s), and a temporary increase in social security expenditures. In some cases, corona bonds also provide for financial help to local governments and medical equipment and healthcare companies facing unprecedented demand due to the pandemic.  

All three bonds are issued by reputable institutions rated AAA, the highest credit rating. The credit risk associated with these bonds is comparable to the risk of Dutch sovereign bonds, while the coupon rate is slightly higher compared to similar bonds. 


Responsible investor

It is a good that institutions issue special corona bonds, says Oscar Jansen, Credit specialist at APG Asset Management. “The societal and economic impact of the virus is huge and a lot of money is needed to fight the crisis. As a responsible investor, we want to play an active role in this.”

APG is one of the world’s largest green bond investors. These are bonds issued by companies or (semi-) governments to finance green, social or sustainable projects. By the end of 2019, we had invested over €9 billion in green, sustainable and social bonds. These investments also contribute to our clients’ ambitions in the area of sustainable investment, in particular the aims of ABP (20% of AUM in the Sustainable Development Goals by 2025) and bpfBOUW (€12 million by the end of 2020).

Volgende publicatie:
APG embarks on fixed income China

APG embarks on fixed income China

Published on: 29 November 2019

Cooperation with E Fund offers access to interesting market


APG, with its partner E Fund, the biggest fund manager in China, is going to invest in Chinese fixed income securities. The strategy was launched under the name ‘China Fixed Income Strategy’ and increases APG’s access to an interesting market, which more and more international investors are active in. Because the Chinese standards for the environment, human rights (such as labor rights) and good corporate governance are at a lower level than in the West, it is a determining factor in the China Fixed Income Strategy. We asked Sandor Steverink, Head of Treasuries at APG AM, to speak to us about this new step.


It will come as no surprise that Sandor is positive about the newly launched strategy: “As a pension investor, we are always looking for attractive investments that provide stable, long-term and sustainable returns for our pension fund clients and their beneficiaries. In the current low yield climate, we welcome investments that have both solid returns and relatively low risk profiles. With the Chinese market increasingly opening to international investors, this is a good opportunity for us. With the creation of this strategy, together with our partner E Fund, our investment advisor for this strategy, we are expanding our investment universe in a major market.”  


A fixed income strategy; what does that entail?

“In this case, we are referring to a specific investment strategy for bonds, i.e. loans, in China, without distinguishing between corporate bonds and bonds issued by local governments. This is because the boundaries between them are less defined in China. In this strategy, attention to ESG (Environment, Social and Governance) factors is important. This is standard at APG, but it is a new concept in China.”


What will it yield for our pension funds and beneficiaries?

“As stated, this type of investment yields a good profit at a low risk. In addition, this strategy offers a good worldwide distribution in your investments when you combine it with other fixed income securities. Because China, despite the further globalization, still has its own dynamic, which provides diversification in your investment portfolio, because not everything moves in the same direction at the same time. On top of that, the Chines fixed income market is a once-in-a-lifetime opportunity. A market of this scope has never before opened up in the way that China is right now. So far, China has been greatly under-represented in our investment portfolio, especially considering it is the second economy of the world. Now that the Chinese markets have opened and China is increasingly included in worldwide benchmarks, there is all the more reason for the proportion of Chinese investments to be a reflection of China’s prominent position in today’s world economy.”


How do you handle investment in a country that is controversial in terms of human rights?

“ESG is a very important factor in the strategy. Because this is a very sensitive issue with China and the ESG standards are lower there than in the western world, we have to do more research into the agencies we invest in. That is why we are starting with a more concentrated portfolio than usual, within fixed income securities, where risk-distribution is very essential. Because we are cooperating with E Fund, we have direct access to the information about these companies and agencies. We are working hard to expand the ESG information about China and this will also increase the diversification in the portfolio. In addition, reporting about ESG and Responsible investing is gaining more of a foothold in China as well, due to regulations by the Chinese governments and due to the internationalization of China’s financial markets. APG and E Fund want to be part of the vanguard of players that are part of that development. In 2016 we already joined forces with them to invest in China A-shares*, which fully comply with the requirements used by our pension fund clients for responsible investing. We are now going to do the same thing for investing in fixed income securities through the China Fixed Income strategy. We hope and expect that the Chinese parties that are issuing the bonds, will become increasingly aware of the importance of responsible investing.


We implement our clients’ responsible investment policies in all markets in which we operate, including China. This means we asses all companies we can invest in on general and sector-specific ESG criteria. Given China’s growing importance in international capital markets and the specific challenges on ESG disclosure and awareness in that market, we believe it is essential to have a strong local presence and ‘boots on the ground’. This is why we are opening up a dedicated office in Beijing and pool local expertise and experience with E Fund.”


How do you expect this strategy will further develop?

“China Fixed Income is the first allocation (allocation of capital to a specific category of investments) to China, and we are thinking that in ten years, the three biggest fixed income markets: US, Euro and China, will carry equal weight. But we are going by the principle: ‘start small and learn fast’.”


Read the press release


* Chinese A-shares are shares of companies that are located in mainland China and are traded in the two Chinese stock markets, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE).

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APG anchor investor in first SDG-bond

APG anchor investor in first SDG-bond

Published on: 7 October 2019

APG has participated in the landmark first-ever SDG-linked USD bond deal, issued by Enel. APG does this on behalf of its pension fund clients ABP, bpfBOUW and SPW. Being the largest electric utility in Italy and one of the largest in the world, Enel is a big renewables developer with power assets across the globe.


The new bond takes sustainable financing one step further than green or sustainability bonds. Whereas the proceeds of the latter are used to fund green or social projects, the Enel bond is the first to be directly linked to the United Nations Sustainable Development Goals (SDGs). These goals - 17 in total - aim to achieve a better and more sustainable future for all and address the major global challenges, including poverty, inequality and climate change.

Enel has promised investors that 55% of its electricity generation capacity will be renewable by the end of 2021. This contributes to SDG 7: Affordable and clean energy. If Enel is unable to meet this commitment, investors will receive 0.25% extra interest on their bond holdings. As of June 30, 2019, 46% of Enel’s capacity was classified as renewable.


Three times oversubscribed
APG’s participation in the deal was well-received by the company and the banks involved in marketing the deal, as they looked for participation by credible, sustainability-oriented investors. Given this context, they view APG as an anchor investor. Although the deal was almost three times oversubscribed, APG received its full allocation of USD 50 million. This highlights APG’s standing in the market as a leading responsible investor as well as its long lasting relationship with Enel.

The deal also demonstrates APG’s active role in the sustainable finance market. Over the last year, APG’s credit team continuously engaged with parties involved on how to structure the transaction. APG was one of the investors Enel elected to meet with and discuss which particular features of an SDG-linked bond APG and others investors would support.


In the future, Enel hopes more of its bonds will contain these types of SDG commitments, perhaps also related to other SDG's. This way, Enel signals to the investment community that they are a sustainable company and serious about their commitment to advancing the UN SDGs. Enel hopes that this will catch on in the market place and encourage other firms to issue similar bonds.

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APG encourages sustainable green bond growth

APG encourages sustainable green bond growth

Published on: 21 May 2019

APG views the issue of the first Dutch sovereign green bond as indication of the market’s increasing maturity. As a leading long-term responsible investor, we actively contribute to initiatives aimed at expanding the size and scope of this market.


Today, APG announced that it has invested € nearly 250 million in the green Dutch sovereign bond on behalf of its pension fund clients. The investment contributes to our clients’ ambitions in the area of sustainable investment, in particular the aim of ABP and bpfBOUW to double investments aligned with the UN Sustainable Development Goals (SDGs) by 2020.


Three focus areas
APG’s approach to investing in green, social, and sustainable bonds (‘green bonds’) focuses on quantity, quality and engagement, says Oscar Jansen, senior portfolio manager Credits. “We think about how to grow our allocation in the context of risk/return requirements and limited supply, we establish clear internal guidelines to ensure we uphold the ESG quality of our investments, and we promote greater issuance and enhanced market standards.”

Concurrently with the Dutch sovereign green bond issuance, APG today published its Guidelines for Green, Social and Sustainable Bonds. Jansen: “Issuers ask for guidance on what meets investor green and social standards and requirements. Clearly communicating our expectations can help alleviate issuer concerns about the market’s response to a potential green bond program and thereby serve as a further market stimulus.”


Developing the sovereign market
The growth of sovereign issuance of green bonds represents another potential avenue for growing our green bond allocation. In addition to our engagements with corporate green bond issuers, APG also articulates its expectations on green finance in dialogue with sovereign issuers. On this theme, APG together with the World Bank recently organized a workshop in Washington DC. We enter into dialogue with sovereigns about progress on the UN Sustainable Development Goals and Paris Climate Agreement and the potential role of green bonds in financing these transitions.


Leading green bond investor
APG is one of the world’s largest green bond investors. By the end of 2018, we had invested over € 6.8 billion in 142 green, sustainable and social bonds on behalf of our clients ABP, bpfBOUW, SPW and PPF. APG is a member of the Climate Bond Initiative and is a key contributor to several industry initiatives. We also give feedback to rating agencies on their green bond assessment methodologies and have actively contributed to the proposed EU Green Bond Standard.

Investor demand for corporate green and social bonds continues to be high, but the US market remains constrained by limited supply compared to Europe. In March, APG’s New York office for the second time hosted a group of institutional investors and underwriters to exchange views on the obstacles to corporate issuance of green bonds and ways to overcome them, this time with a specific focus on the food and beverage sectors.


Volgende publicatie:
APG calls on US corporates to increase green bond issuance

APG calls on US corporates to increase green bond issuance

Published on: 18 December 2018

Investor demand for corporate green bonds continues to be high, but the US market remains constrained by limited supply. Important challenges to further market development are limited sector diversity, the uncertainty related to qualifications and standards for green bonds, and the required size of an issuance to be potentially attractive to investors like APG.


demand for corporate green bonds continues to be high, but the US market remains constrained by limited supply. Important challenges to further market development are limited sector diversity, the uncertainty related to qualifications and standards for green bonds, and the required size of an issuance to be potentially attractive to investors like APG.

APG hit a milestone last month by reaching $1 billion in green, social and sustainable (‘green’) bonds in the US Credits portfolio. Nearly two-thirds of these holdings is corporate. ‘This is an indication that our efforts to grow issuance are yielding results’, says Ann-Marie Griffith, Managing Director Credits US. ‘But there is more work to be done. We must activate our peers and partners across the industry to stimulate issuance of US corporate green bonds.’ 

Based on a round-table discussion with 20 institutional investors and underwriters in the US earlier this year, APG offers the following suggestions that may contribute to solving these obstacles:


Communicate the benefits
Corporate issuers in the US tend to adopt a ‘wait and see’ attitude, as they perceive designing sustainability products that meet the potential investors’ needs to be too complex. Reputational and other benefits of green bond issuance are often not well communicated. Investors should stress the benefits of having broader, more diverse sources of funding. In addition, they can point out examples of successful green bonds from US municipal or quasi-governmental issuers like Fannie Mae.

Act as a sounding board
The absence of generally accepted criteria to define whether bonds are actually green is often perceived as an obstacle to green bond issuance. Yet it should be pointed out that much progress is being made in defining and classifying ‘green’ investments. APG’s Taxonomy on Sustainable Development Investments (SDIs) is a now fully operational framework that can be used to design products that meet investors’ sustainability needs. In addition, APG and other investors can act as sounding boards by engaging with potential issuers before issuance, providing feedback on proposed green bond programs and outlining investors’ expectations.

Pool green projects
Green bonds are exposed to the same underlying credit risk as regular bonds and are therefore subject to the same requirements in terms of risk, return and costs. In many cases, issuance is too small to be attractive to potential investors from a risk management perspective. Companies should explore ways to aggregate green and social projects to a size that would meet minimum index inclusion requirements. This would enable issuers to access funding for their smaller scale initiative and attract institutional buyers.  

For APG, responsible investing is a way to improve the investment portfolio in terms of risk and return, and simultaneously contribute to a sustainable world on behalf of our clients and their participants. Investing in green and social bonds helps our clients achieve their sustainable ambitions; in particular it helps ABP and bpfBOUW double investments aligned with the UN Sustainable Development Goals (SDGs) by 2020. By the end of 2017, we had invested nearly € 4.5 billion in green bonds and since then this figure has increased further.

As a leading, long-term responsible investor, APG advocates for responsible, sustainable growth in the green, social and sustainable bonds market. We are a member of the Climate Bonds Initiative and contribute actively to initiatives aimed at expanding the size, scope and transparency of this market.