APG Asset Management, on behalf of Dutch pension fund ABP, has invested €75m in blue bonds, issued by Italian utility company A2A, designed to improve Italy’s water infrastructure.
APG said the bond aims to modernise water infrastructure – such as pipelines, meters and sensors – with a specific focus on water conservation and cleaner water.
Michael Bosman, senior portfolio manager for credit at APG, said: “What makes this investment unique is that APG, on behalf of ABP, acted as cornerstone investor and agreed on a one-to-one basis how the €75m – part of a larger €155m financing round with five other investors – will be allocated and how its impact will be reported.”
He added that the investment “also counts fully” towards ABP’s target of €30bn invested in impact investments by 2030. The fund has stated that it plans to allocate €10bn of these impact investments within the Netherlands, focusing on affordable housing, sustainable energy and innovation.
Bosman said: “Thanks to this investment, A2A will go beyond what is legally required in terms of water conservation and water quality. The impact reporting is linked to KPIs jointly defined by ABP and APG, such as clean and efficient drinking water. That’s why this investment fits within ABP’s impact framework.”
A2A itself has labelled the bond “green” bond, but ABP calls it “blue” bond because the proceeds from the issue will be used to reduce water loss.
It is not the first time that ABP has invested in blue bonds. In 2023, APG invested in Ørsted’s five-year €100m blue bond to finance initiatives targeting offshore biodiversity and sustainable shipping.
Shahzad Memon, portfolio manager for responsible investment fixed income at APG, added that A2A’s bond is part of a trend toward bonds with increasingly specific characteristics.
He said: “It started with the rise of labelled bonds. Those gave us assurance that the proceeds would be used for green projects, and we could assess whether those projects aligned with our client’s objectives. However, the scope of labelled bonds was still quite broad.
“As ABP’s responsible investment framework becomes more precise – focusing on climate, biodiversity and impact – not all labelled bonds fit our client’s criteria anymore. This impact investment in A2A proves there is indeed a opportunity for these highly targeted bonds that contribute to ABP’s impact investing ambition.”
Memon said that, while A2A’s blue bond is less liquid than many other corporate bonds, investors will continue to make commitments to these kinds of investments.
He said: “Water as a theme – whether related to drinking water quality, drought or flooding – is here to stay. An investment like this, in a company committed to improving water infrastructure, will likely attract interest from other investors who want to learn more – just as the Ørsted investment did.
“Banks are now familiar with green bonds, but less so with these types of impact investments. We expect the market for impact bonds to grow in the coming years, and this deal is an important step in that direction.”
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