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).