Sweden guarantees pension fund investments in sustainable development

For the first time, the Swedish International Development Cooperation Agency (Sida) has provided a public guarantee of SEK 1.5 billion (US$180 million) for a private bond focusing on health and social development in low- and middle-income countries, through a guarantee instrument, 'Financing For Healthier Lives'.

The guarantee instrument has been developed in collaboration with a Swiss fund manager, 'responsAbility', and Danske Bank. The funds will be lent to companies in low- and middle-income countries through Alecta (a Swedish occupational pension plan manager) and Afa Försäkring (a Swedish insurance company).

Sida’s public guarantee aims to lower the risk on investment so that, in addition to regular official development assistance (ODA), private institutional capital can be mobilized for development projects that support poverty reduction. On the international capital market, the new bond will be classified as a Social Bond, which refers to bonds that fund "new and existing projects with positive social outcomes".

Kalle Hellman, Sida's Deputy Head of Unit for Guarantees and Catalytic Financing for Development, explained that by using approximately SEK50 million (US$6 million) from Sweden's ODA, SEK 1.5 billion (US$180 million) from private funds can be invested in line with the UN's sustainable development goals (SDGs), with a focus on health and social development. This will provide a good exchange for Sweden's currency, said Hellman, and Sweden could "show the market that this type of investment is both possible and interesting". In the long term, Hellman hopes that market players can make direct investments without a guarantee agreement.

Op-ed – Sida (in Swedish)