To combat the Covid-19 pandemic and its socio-economic impact, APG on behalf of its pension fund clients has now invested well over €500 million in Covid-19 response bonds. The proceeds of these bonds are used, among other things, to fund emergency health measures and support packages for small and medium-sized enterprises in affected countries.
APG – on behalf of ABP, bpfBOUW, SPW and PPF APG – recently participated in the issue of Covid-19 bonds by UNEDIC (€50 million), BPI France (€28 million), Instituto de Credito Official (€25 million) and Bank of America (€32 million). The proceeds of these bonds are earmarked for financing a range of 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.
In euro terms, APG since late March has invested €554 million in Covid-19 response bonds. In late March, the Nordic Investment Bank issued the first bond specifically intended to combat the Covid-19 pandemic and its impact. Since then, many sovereigns, supranational organizations and agencies – as well as a limited number of corporates - have followed. In just a few months, the Covid-19 bond market has reached an estimated €60 billion. The market is likely to keep growing, as governments and companies rush to issue debt to help ease the effects of the pandemic.
In most cases, APG invests in Covid-19 bonds 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.
It is good that institutions issue special Covid-19 bonds, says Oscar Jansen, Credit specialist at APG Asset Management. “The societal and economic impact of the pandemic 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).