ATP builds out investment-grade green bonds portfolio – Pensions & Investments

ATP, Hilleroed, Denmark, sold some of its U.S. high-yield exposure to finance its new green bonds allocation, a spokesman at the fund said Wednesday.

The 924.9 billion kroner ($144.2 billion) pension fund got rid of 6 billion Danish kroner in U.S. high-yield bonds to buy 7 billion Danish kroner in euro-denominated investment-grade green bonds. However, the fund still maintains a significant exposure to U.S. high yield in derivatives.

The spokesman said that some of the pension fund’s external managers were terminated as a result of the change but would not disclose their names. ATP is also moving its new green bonds allocation in-house to reduce costs and better control ESG integration.

Following a decision announced earlier this year to create a new sustainable bonds allocation that includes green and social bonds, ATP is ramping up its green bonds allocation. Currently, the fund has 1.5 billion Danish kroner invested in green investment-grade corporate bonds. The size of the intended allocation was not provided.

In its hedging portfolio, ATP holds around 40 billion Danish kroner in sovereign and supranational green bonds. ATP’s hedging portfolio is intended to fully protect ATP pensions guaranteed to plan participants by law, while the investment portfolio seeks to provide additional return.

“We are still ramping up the green corporate bonds portfolio as the market is not too liquid and we need time to be very thorough, to avoid greenwashing. So we have a lot of ESG filtering to do on both the issues and the issuers,” the spokesman said.

ATP believes that ESG integration is an opportunity to get better returns. “Changing our cash corporate bond portfolio to green bonds is a step in that direction future proofing the investment portfolio,” the spokesman added.