• 17 apr 2023
  • Blog
  • Assetmanagement
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The EU Green Bond Standard: targeted investment in sustainable activities

The European Union was the first to lay down rules for green bonds in February 2022. A good development, according to senior investment managers Wilfried Bolt and Jesus Martinez. 'The standard enables us to efficiently and effectively allocate the participants’ money to activities that lead to real sustainability.'
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Jesus Martinez Rodriguez

Senior Investment Manager Fixed Income
Wilfried Bolt 480X480 Pggm

Wilfried Bolt

Senior Investment Manager Fixed Income


‘These rules enhance the existent standard and make it even more clear which investments actually contribute to the Paris Agreement. Thanks to the legal standard, companies are only allowed to issue green bonds if they spend most of the money raised (at least 85%) on activities included in the European taxonomy. Moreover, even before we start investing, we know for which specific activities the money is used. Companies are also obliged to report on this, and this is independently checked externally. In this way, the standard helps us to combat greenwashing and to achieve PFZW's ambition: by 2025, 20% of the assets will demonstrably contribute to SDGs.'

25% less emissions with new Paris metro network
'Among other things, we invest in green bonds from Société du Grand Paris (SGP). With the green bonds, SGP finances the realization of the largest infrastructure project in Europe: a network of 200 kilometers of tunnels in 4 metro lines, 2 extensions of existing lines and 71 metro stations, 60 of which are new.  We know exactly which lines and metro stations our investment is spent on and how much impact this makes. With the new metro network, SGP hopes to reduce greenhouse gas emissions by 25%. In addition, it is also a financially attractive investment for us.'

Green government bonds for climate adaptation
'Dutch sovereign green bonds appeal to us, because a quarter of the proceeds are used for climate adaptation such as raising the dikes. These bonds were actually the first major ones to recognize that adaptation to climate change is a viable and necessary category for sovereign green bonds next to mitigation. They are a good example of how you can effectively use money for climate adaptation. In addition, green investors - identified by the treasury as such - are given priority when purchasing green government bonds. This also encourages other investors to meet the high sustainability requirements.'

EU Recovery Fund
'Under the name Next Generation EU (NGEU), the EU raises money to finance sustainable post-corona recovery plans of individual member states. Of all EU bonds, 30% is issued in the form of green bonds, totaling around 45 billion a year. The recovery plan aims to ensure that Europe emerges from the crisis greener. For example, Member States are forced to think about sustainable investments. It also fits perfectly into our portfolio. We can contribute to tackling or adapting to climate change and to our financial objectives.'

Wat can PGGM mean?
'Most investors worldwide invest in government bonds. We limit ourselves - for our portfolio in developed countries - to Europe, making us one of the largest investors there. For example, we invest multiple billion euros in French, German and Dutch government bonds. When these countries started issuing green bonds a few years ago, we were able to think and decide on the framework. Thanks to our membership of the International Capital Market Association (ICMA), we can participate in the annual decision-making on the Green Bond Principles. With this we can help the market move in the right direction;  be even more transparent in terms of revenue, impact and the management of government on these topics.'

Improvement in the right direction
'With every investment it is important to take into account any social or climate risks, and this is even more true with green bonds. The EU taxonomy and EU Green Bond Standard force companies and government agencies to be more transparent about what they do and what positive and negative impact they make, even before we invest. These clear agreements are also important because we invest in bonds that last 15 to 20 years, well over the political life cycle of 2 to 4 years. A new government could deviate from agreements made. Under the EU Green Bond Standard, such a thing is hardly possible anymore. The reputational risk is just too high. If a government deviates, it could potentially lose the EU-label. We can stop considering the investment as sustainable, which makes it less appealing to have in our portfolio and the government loses credibility. So the EU Green Bond Standard is an improvement in multiple areas.'

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