The Folksam Group (Sweden) has announced that it is investing SEK 2.5 billion in a new bond issued by the City of Stockholm. The maturity is five years. About half of the borrowing is planned to go to investments in the city’s water infrastructure. Folksam Group says the investment is part of its strategy to support climate adaptation and green transition.
In the announcement last week, Folksam Group said climate adaptation of water infrastructure is a clear example of a local concern with a national interest. The Group believes insurance companies have a clear interest in ensuring that the necessary investments for climate adaptation, such as water infrastructure, are made to reduce the risk of customers suffering climate-related damages. In August last year, Storm Hans swept across large parts of Sweden and caused enormous devastation. The cost is estimated at SEK 1 billion for Sweden’s five largest insurance companies.
“Last year’s torrential rains and floods showed the need for investments in water infrastructure, such as sewage treatment plants around Sweden. The City of Stockholm is pursuing proactive climate adaptation work and planned investments are a continuation of important climate adaptation projects that are already underway. It is gratifying that the Folksam Group can be involved in supporting a municipality that both adapts and strengthens its resilience to climate change,” says Marcus Blomberg, Investment Manager at the Folksam Group.
The need for investments in water infrastructure in Sweden is well documented and it involves very large investment volumes – just under SEK 600 billion or about 10 percent of Sweden’s GDP until 2040 – according to a report from the Swedish Water and Wastewater Association.
“Pension capital is well suited to make this type of investment as it has a long-term perspective. Municipal bonds are a good example of how we generate returns for KPA Pension’s customers and at the same time contribute to sustainable social development,” says Camilla Larsson, CEO of KPA Pension.
The City of Stockholm is issuing the bond to finance ongoing work to upgrade the infrastructure for wastewater treatment, which for example involves reducing the risks associated with heavy rainfall. It also involves upgrading the main pipeline network and building a new high-tech facility for waste sorting. The city is also continuously working on energy efficiency measures at housing companies, schools and retirement homes. All investments are in line with the City of Stockholm’s integrated environmental programme and climate action plan.
The investment will be distributed among the Folksam Group’s companies as follows:
- KPA Occupational Pension Insurance SEK 1,012 million
- Folksam Life SEK 570 million
- Folksam Occupational Pension SEK 420 million
- Folksam General SEK 354 million
- Consumer Co-operatives Pension Fund SEK 144 million
- Total SEK 2,500 million (USD 240.72 million)
Photo: Shutterstock c/o Folksam
