APG, the investment manager for Dutch public sector fund ABP, has committed €75m to a blue bond aimed at improving Italy’s water infrastructure.
The bond, issued by Italian utility company A2A, aims to save around 630,000 m³ of water annually by modernising infrastructure such as pipelines, meters and sensors.
The commitment is a cornerstone investment within a wider €155m financing round alongside five other investors, as Michael Bosman, senior portfolio manager credits at APG, explained.
Thanks to this investment, A2A will go beyond what is legally required in terms of water conservation and water quality. The impact reporting is linked to KPIs jointly defined by ABP and APG, such as clean and efficient drinking water.
In January this year, A2A became the first corporate issuer of green bonds aligned with the EU’s new taxonomy. A prominent issuer of green and sustainability-linked debt, the company confirmed in May that it had missed a renewable energy capacity target for an SLB issued in 2022, which triggered a coupon step-up.
APG has gradually increased its allocations to green and sustainability-labelled debt. In 2023, APG’s credits team invested in a blue bond issued by Danish energy company Ørsted, aimed at financing projects that promote healthy seas and oceans. Shahzad Memon, portfolio manager responsible investment fixed income, commented: “Since the Ørsted deal, the credits team has been working closely with utility companies and advising banks on the required impact standards. This effort is starting to bear fruit with different utilities expressing interest.”
Despite A2A’s recent coupon step-up, the team expresses confidence in the issuer. The transaction was a private placement, ensuring close interaction between issuer and investor, Bosman explained. “We have known A2A for years as a solid bond issuer. They are progressive in the labelled bond space and were among the first companies to issue a bond under the new EU Green Bond Standard earlier this year, making them an innovative frontrunner.”
