Denmark’s ATP Makes Forays into Social Bonds

Denmark’s $156.1 billion pension giant ATP said it has made its first investments in social bonds to include in its sustainable portfolio. The pension fund made the announcement while reporting near-record earnings results for 2020.

“In 2020, we decided to take it one step further and expand our universe to also be able to invest in social and sustainable bonds,” ATP Chief Executive Bo Foged told journalists at a press conference following the release of its annual results, according to Reuters.

Social bonds are any type of bond instrument in which the proceeds will be used exclusively to finance or refinance in part or full new and/or existing eligible social projects, such as ending child labor or improving food security and access to education. The sustainable investing instruments have become increasingly popular during the COVID-19 pandemic, according to S&P Global Ratings, which said social bond issuance had quadrupled during the first half of the year when its growth was outpacing that of green bonds.

The firm also said that total social bond issuance stood at $71.9 billion as of October and could approach $100 billion for all of 2020. However, financial market data provider Refinitiv has an even more robust view of the market, estimating that the total issuance of social bonds reached $164.2 billion in last year, nearly 10 times more than in 2019.

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ATP is looking to have DKK50 billion (US$8.15 billion) invested in sustainable investments by the end of this year, including its existing investments of DKK30 billion in green bonds, according to Reuters, which cited Foged as saying the pension invested €95 million ($114.9 million) in social bonds in 2020.

The pension fund recently reported 2020 investment returns of 23.3%, or DKK29.9 billion, which was the second highest return in the pension giant’s history. As a result, the fund’s total net asset value rose to DKK959.8 billion as of the end of the year.

“ATP’s returns have to contribute to pensions in the long term. In order to deliver, our investment decisions must be sustainable—that is, they must have long-term durability,” Foged wrote in ATP’s annual announcement of financial statements for 2020. “This makes sustainability a central and integral guideline for ATP.”

Foged added that he is often asked if sustainability and solid returns are not opposites, and that “the response is no; to me, the two are insolubly linked.”

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Tags: ATP, Bo Foged, Denmark, Green Bonds, Refinitiv, Refinitiv Denmark, S&P Global Ratings, social bonds, sustainable investing

Dominic Garcia

The David Villa I knew was so much more than the visionary leader and gold standard CIO the industry knows. David Villa, for me, was a teacher, a mentor, and one of the most influential people in my life.

It is no secret David had a pioneering spirit and innovative vision for a public pension system in America. However, his true gift was being able to align and rally human capital and energy around that vision to make it happen. David talked about building a cathedral. This was his metaphor for building an enduring public pension system that would stand the test of time. Like all great architects of cathedrals, he knew its completion would go beyond his lifetime. Thus, he worked to leave blueprints for others to follow the work and mission.

David Villa

David called working for a public pension “missionary work.” He elevated the work to the highest level—a calling to ensure hundreds of thousands or millions of hard-working Americans can live their later years in dignity. He dedicated himself to ensure the cathedral worked for the participant and all its partners aligned with the mission.

I was fortunate to be one of his students. David recruited me to the State of Wisconsin Investment Board (SWIB) from our native New Mexico early in my career and showed me the way. He shepherded me in more ways than I realized, even today. I became a missionary. My mission eventually led me back to our native New Mexico to implement the lessons I learned. True to the mission, pre-pandemic, David provided inspiring testimony to the New Mexico legislature regarding the value of preserving public pensions. He did this for other pensions around the country, which was his way of extending the missionary work.

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David will undoubtedly be remembered for his mark on the US public pension industry, setting the standard and laying the blueprints for others to follow. However, his true mark will be how he changed lives. How he was able to get you to be your best. How he was able to get you to learn something new and grow. How he was able to see your path and help you walk down it.

He certainly changed my life. My family and I will be forever grateful.

Dominic Garcia is the chief investment officer for the New Mexico Public Employees Retirement Association (PERA). He was previously a senior manager at SWIB for nine years.