Sweden’s biggest pension fund, Alecta, has invested just over SEK1bn (€100m) in the first African social government bond, financing welfare and development in an unnamed West African country.
The SEK877bn fund said the bond securitises a loan taken by the country and is being managed by Japanese bank MUFG, with insurance for the loan being provided by the African Trade Insurance Agency (ATI).
A spokesman for Alecta told IPE the identity of the issuing country was not being disclosed. He said the investment would form part of Alecta’s overall portfolio, sitting within the euro portfolio.
Peter Lööw, sustainability manager at Alecta Asset Management, the pension fund’s investment arm, said: “We see an increased range of new types of investment opportunities where several actors come together and through various risk-reducing measures make it possible for institutional capital to go in and finance development in new regions, without compromising on our assignment.
“In this case, through local and international reinsurance through credit guarantees,” he added.
Alecta said the bond will finance areas such as schooling, healthcare, food safety and infrastructure — contributing to most of the United Nation’s UN Sustainable Development Goals, including ‘no poverty’, ‘good health and well-being’ and ‘quality education’.
It explained that ATI reinsured the entire nominal amount of the loan through a number of international reinsurance companies, adding that the bond’s financing was earmarked for social schemes and basic services in rural areas.
According to the pension fund, ESG research firm Vigeo Eiris has checked that the framework developed by the country follows the International Capital Market Association’s Social Bond Principles. One of these, it said, is that the bond issuer must report back to show the effects that the investment contributed to.