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 UNIDEC (€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.
The Bank of America bond is noteworthy since it is the first corporate US bond with a framework fully dedicated to providing Covid relief. The proceeds will directly support healthcare organizations on the front lines, such as not for profit hospitals. “Prior to the issue, we shared and discussed our Covid bond guidance document with Bank of America and they found this engagement helpful”, says Joshua Linder, credit analyst Fixed Income at APG Asset Management. “
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).