APG invests in new Dutch sovereign green bond with a blue focus

Published on: 20 October 2023

This week the State of the Netherlands has issued its second green bond. This issue has a particular focus on water-related investments, with proceeds earmarked, for example, for the Dutch Delta Fund. APG’s Government Bonds investment team met with members of the Dutch State Treasury Agency (DSTA) in the weeks leading up to the launch to find out more about the deal and discuss the terms. APG, which has participated on behalf of its pension fund clients, has invested €600 million.


In summary:

  • APG invests €600 million in second Dutch green bond on behalf of its pension fund clients
  • The new green bond framework reflects latest EU Taxonomy amendments
  • Investments in flood risk protection form part of new “blue expenditure” criteria


In 2019, the Netherlands was the first country with a triple-A rating to issue a green bond. “The Dutch government’s second issue and revised green bond framework reflect its support for the green bond market as a means to promote sustainable development and contribute towards the Paris Agreement goals,” says Senior Portfolio Manager Treasuries, Kim Liu. “The EU Taxonomy also plays a key role in steering capital to meet the objectives of the European Green Deal and in improving transparency to help investors identify investments that make a substantial contribution to the EU’s climate and environmental objectives.”


Pre-launch engagement

This new bond has an initial issue size of €4.98 billion, is a 20-year green Dutch State Loan (DSL) and was over 3.5 times oversubscribed. In the run up to the bond’s launch, the DSTA had meetings with a number of investors, including APG. Topics covered at this meeting included developments in the Dutch economy and an in-depth discussion on the new green bond framework update and its EU taxonomy alignment. Liu: “Over the years, in our annual meetings with the DSTA, we have shared our expectations and input, for example, when the first green bond framework was published. These discussions with the issuer help us to better understand their intentions and allow us to give our views and those of our clients on certain themes with regard to responsible investing.”


Green Bond Framework and EU Taxonomy alignment

In September, the Dutch government published its updated Green Bond Framework. 

The use-of-proceeds expenditure covers projects in four eligible green categories: renewable energy, energy efficiency, clean transportation, and climate change adaptation and sustainable water management. Liu: “The framework is aligned with the International Capital Market Association's (ICMA) Green Bond Principles and Moody’s second-party opinion concludes that it demonstrates a high overall contribution to sustainability. More importantly, it also meets our (and our clients) requirements, with a designated use of proceeds that creates a positive impact.”  


Blue expenditures

While alignment with the EU Taxonomy is increasingly becoming the market standard for companies, it is still in its infancy when it comes to sovereigns, according to Liu. “In this context, we appreciate the efforts made to align the new framework – eleven out of the twelve economic activities fully adhere to all EU taxonomy criteria. These criteria relate to the extent of the contribution projects make, and to the do-no-significant-harm (DNSH) requirements that mean that activities that meet one objective do not come at the expense of another.” The updated framework also aligns with a new set of Taxonomy criteria, published in June by the European Commission, explains Liu. “This is the first triple-A sovereign green bond to have “blue” activities fully mapped to the EU Taxonomy. These include expenditure to finance plans, updated annually and outlined in the Delta Programme, to protect the country from flooding, mitigate the impact of climate change and ensure supplies of freshwater.” The updated framework further aligns the green bond issuance program with current Dutch policy on climate change to achieve the country’s climate targets.


Leading investor in a growing market

According to figures from the Dutch central bank (DNB), The Dutch green bond market has doubled in size since October 2020, reaching €122.9 billion (end July 2023), up 21% from a year earlier. “This growth is also reflected in green bond investments at APG. As of end 2022, we held €20 billion in green, social and sustainability bonds on behalf of our clients, €13.8 billion of which was in sovereign and government-related bonds,” says Liu. “Green bonds’ use-of-proceeds structure make them attractive investments for a responsible investment portfolio. The climate-related and environmental projects they finance make a demonstrable impact. Government issuers have an important role to play in leading the transition to a low-carbon economy, by setting standards and establishing policy that helps achieve this. Sovereign bond investments also offer investors unique exposure to large, strategic infrastructure projects in the public domain, like those outlined in the Delta Programme.”

APG is constantly evaluating and raising its standards as the market evolves and in line with new market developments, such as the adoption of the EU Taxonomy. This also involves talking to issuers on a regular basis to discuss their plans and inform them of the responsible investing ambitions of APG and its clients.