APG has today published its updated Guidelines for Green, Social, and Sustainable Bonds (‘labeled bonds’), reflecting its pension fund clients’ increased expectations of issuers since the original publication in 2019. The current update also aims to proactively align the guidelines with developments in the labeled bond market, ensuring that they remain effective in an evolving environment.
When APG first published the guidelines, the labeled bonds market was in a phase of increasing momentum and growth. Differing views among asset managers underscored the need to provide guidance to the market and set standards, explains Oscar Jansen (Expert Portfolio Manager Credits). “Our guidelines on best practices helped us to communicate expectations, while streamlining our discussions with a variety of issuers and banks.”
“The updated guidance document more specifically articulates our expectations of labeled bonds to ensure that these bonds are structured to achieve our clients’ increased responsible investment ambitions,” Jansen continues. Considerations for sovereign issuers are now also included. The guidelines also set out APG’s pre-investment assessment framework for evaluating the structure of labeled bonds.
High-integrity growth
The labeled bond market has grown and matured over the years. The current heightened policy uncertainty and anti-ESG sentiment in the US does appear to be weighing on the local appetite for issuance, says Simone Andrews (Senior Responsible Investment Manager Fixed Income). “Still, the projects and assets that are financed continue to be relevant, and funding remains needed. Investors play a key role in highlighting the value of these instruments to the market.”
Internationally recognized principles and standards like the International Capital Market Association (ICMA) Principles have helped to guide the label bond market’s development, promoting standardization and transparency. Willem Hettinga (Senior Portfolio Manager Responsible Investment Fixed Income): “As the market continues to evolve with greater diversification and ongoing innovation, safeguarding its credibility and integrity is essential. Labeled bond investments can offer our clients attractive returns, while supporting their responsible investing goals. Our guidelines aim to promote the sustainable debt market’s credibility and scalability, ensuring high-integrity growth.”
Real-word outcomes
Labeled bonds are an important instrument for APG to help clients achieve their ambition to deliver real-word outcomes, according to Joshua Linder (Senior Credit Analyst, Lead Sustainability Research). “They allow us to target projects that align with our clients’ responsible investing themes, while offering insight into the real-world outcomes achieved via impact reporting at the bond or project level.” Labeled bond investments can also help APG to access, on behalf of its clients, market segments that are difficult to reach via other asset classes – for example, electricity transmission and distribution companies.
APG’s guidelines on best practices encourage issuers to report on the impact created over the life of the bond, with detailed output-based impact metrics, such as carbon emissions avoided or improved financial resilience. As the labeled bond market has become more complex and the number of individual bonds in APG’s portfolio has grown, APG implemented an enhanced internal evaluation and monitoring system. Andrews: “With the new system, which is also used for approval, we are better equipped to closely monitor the progress of each labeled bond in our portfolio over time.”
Fostering consensus
Later this year APG will organize its eight annual labeled bond roundtable, bringing together a range of stakeholders to exchange views on ways to help grow the sustainable debt market while maintaining its integrity. This edition will focus on developing greater consensus and transparency within the industry to reiterate demand and stimulate growth, particularly in light of today’s rapidly changing global context. Linder: “The updated guidelines will help facilitate discussions, and allow us to convey to the rest of the market what we consider appropriate standards, in line with our clients’ expectations.”
Published on:
16 April 2025