Swedish pension fund AP7 has invested SEK 2bn in bonds with a focus on oceans and water purification, known as ‘blue’ bonds.

It has invested SEK 1bn in a blue bond issued by the Asian Development Bank (ADB) and SEK 1bn in one issued by International Finance Corporations (IFC), which is part of the World Bank.

While both bonds are informally known as blue bonds as they focus on investments relating to water, they are officially green bonds.

IFC's bond was created with the aim of contributing to sustainable development in developing countries through projects that benefit the oceans, and increase the availability of clean water and sewage.

Meanwhile, the ADB bond finances projects in Bangladesh for flood and drought management, and projects to manage waste in the region around the capital Male in the Maldives to reduce disaster risk and improve resilience to climate change, among other things.

AP7's Fixed Income Fund amounts to just over SEK 110bn and is aiming for at least 50 per cent of the capital to be invested in green bonds by 2025.

The pension fund said it was close to the goal already, as green bonds make up around 43 per cent, corresponding to approximately SEK 45bn, of the fund's managed capital.

Commenting on the announcement, AP7 senior portfolio manager, Ulrika Lindén, said: “Water is one of our main focus areas for our green investments.

“Cooperating with development banks such as IFC and ADB is of great importance to finance climate projects where the need and climate benefits are greatest.

“The advantage of green bonds via these development banks is that they bear the credit risk. In this way, AP7 gets great climate benefit but with low risk for Swedish pensioners.”

---