World's first green bond fund celebrates 10 years

10 years ago, Storebrand AM launched the world's first commercial green bond fund*, building on the World Bank’s issuance of the first-ever green bond in 2008. Since then, the market for green bonds has mushroomed, with more than US $1 trillion of sustainable bonds now being issued annually.

The fund has sinch launch in March 2015, financed a variety of sustainable projects.

- Green bonds are an excellent financial instrument for earmarking money for climate projects, while providing equivalent returns to traditional bond investments with similar interest and credit risk. The fund has helped channel capital to everything from energy-efficient housing and sustainable waste management to train connections and bike lanes, says Gustaf Linnell, Head of Fixed Income at Storebrand Asset Management.

From niche to mainstream
In Sweden, Storebrand Green Bond, is still the largest green bond fund with over SEK 10 billion in assets under management.

- When the fund was launched in 2015, it was a very niche product and a hard sell where we had to promote and demonstrate the benefits in detail. But now sustainability-related bonds make up over half of all corporate bonds issued in Sweden. You could really say it has gone from niche to mainstream, says Gustaf Linnell.

Opportunity to influence
Storebrand and other asset managers continue to play a crucial role in empowering the market. The taxonomy has established a standardized definition of what qualifies as 'green,' increasing transparency, clarity, and comparability Linnell states.

- As a result, reporting has improved, but there is still potential for investors to gain a more precise understanding through quantifiable data on the actual outcomes.

The real estate sector makes up a large part of the Swedish corporate bond market and the green portion of the corporate bond market.

- This is an important sector to transition as buildings account for about 40% of the EU's total energy consumption. Here, a transition can really make a difference, says Linnell.

On the move
Sustainability-linked bonds (SLBs) were introduced in 2019 and wich means that the issuer may have to pay a higher interest rate to investors if they do not meet set sustainability goals.

- Today, SLBs make up around 5% of the portfolio in Storebrand Green Bond. It is a type of performance-based bond that adds an extra layer of transparency with clearly measurable goals. I see that they have strong potential to grow going forward, Linnell continues.

Regardless of regulatory pressures or setbacks, sustainable bonds are a tool growing in popularity to channel capital for a sustainable transition. It creates a willingness in companies to report data that investors can follow to see progress, even without regulatory requirements.

- Despite growing polarization and an 'anti-woke' movement, especially in the US, the continued strong growth of green bonds and sustainability-linked bonds shows that large parts of the business world remain committed to the green transition in Europe and the Nordics, concludes Linnell.

*The fund was when founded named SPP Grön Obligationsfond. It has marketing permission in Sweden.

In its Morningstar category, "Fixed income SEK Bonds Mix," Storebrand Green Bond is in the top 5 for three-year rolling returns (as of 2025-02-17).

The Storebrand Green Bond fund has returned 6.02% over the past five years (2019-12-31—2024-12-31), while its benchmark index has returned 2.77% over the same period. Returns in Swedish kronor, excluding inflation. The fund's benchmark index is OMRX Mortgage Bond All.

Historical returns are no guarantee of future performance. Money invested in funds can both increase and decrease in value, and it is not certain that you will get back the entire invested amount. Fact sheets and information brochures can be found on our website.