AlternativesFebruary 19, 2021

Denmark’s ATP Makes Forays into Social Bonds

The pension giant dipped its toe into the increasingly popular instruments with a €95 million investment in 2020.

Reported by Michael Katz

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.

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.”