Biggest Danish Pension Fund Starts Buying Corporate Green Bonds

(Bloomberg) -- ATP, Denmark’s biggest pension fund with $170 billion in assets, is entering the corporate green bond market for the first time, in another sign of how sustainable investments are fast becoming mainstream.

After four years buying green bonds issued by governments and governmental agencies, the investment team at the Hillerod, Denmark-based fund is now comfortable enough with its ability to detect greenwashing to take the next step, said Bo Foged, its CEO.

“We have decided to buy actually green corporate bonds in our investment portfolio,” Foged said in an interview. “That is one of the initiatives that our liquid team has been focusing on this first half of the year.”

The market for fixed-income products tied to sustainability is booming, as extraordinary fires and flash floods provide vivid demonstrations of the cost of ignoring climate change. Corporations and governments globally have sold a record $650 billion in green, social, sustainability and sustainability-linked bonds so far this year.

Read More: Green Bond Issuance in 2021 Surges on Back of Financials

After four years, ATP now holds around 40 billion kroner ($6.4 billion) in green government and agency bonds in its hedging portfolio, and that figure will likely rise, Foged said. The European Union, Spain and the U.K. are among those planning debuts in the market this year.

The government-mandated pension program puts the vast majority of contributions in the hedging portfolio, which is designed to provide pensioners with a minimum payment. ATP also runs an investment portfolio where it takes greater risks, and this is where the corporate green bonds it buys will end up.

“We have to remember that this is a fairly new market,” he said. “It was a bold move back in 2017 to buy the first green bonds, and we have actually grown our portfolio as the market has grown, and and we will probably continue to do that.”

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