Green bond specialist and former AP4 credit portfolio manager Ulf Erlandsson has founded the think tank Anthropocene Fixed Income Institute (AFII), advocating impact investing in fixed-income markets.

The new institute is based in Stockholm and launched with the support of the Growald Family Fund, a New York-based high-impact venture philanthropy fund investing in the transition to a clean energy future.

AFII conducts research across the green versus fossil divide in bond markets, executes advocacy against bond market climate transgressions and works with education and outreach to broaden understanding of the importance of fixed income in the energy transition.

"With the belief that climate commitments must in the end be reflected in the buy and sell decisions of traders, portfolio managers and allocators, the institute takes a novel market practitioner approach to climate change mitigation in the complex fixed income market place," its press release states.

Record year for bond market lending to oil majors

At over USD 100trn in market capitalization, fixed-income markets dwarf the size of public equity markets and play a crucial role for providing finance to corporations, sovereigns and the myriad of economic entities in between. But fixed-income markets are severely lagging in climate change mitigation, it adds.

"Although the green bond market is growing rapidly, it still only accounts for 1 percent of total market size. At the same time, 2020 is already the biggest year ever in terms of bond market lending to oil majors, supplying almost unlimited capital to keep up fossil capital expenditure and protect dividend payments.

In 2019, Saudi Aramco’s inaugural bond saw the biggest ever order book in corporate bond history," the statement adds.

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Passive bond investors

Erlandsson, who acts as the Executive Chair of the institute used to work as a credit portfolio manager at AP4 and as a quant strategist at Barclays Capital in London.

Recently he also worked some 14 months at at Swedish hedge fund Strukturinvest Fondkommission, focusing on the launch of Glacier Impact, a credit-based hedge fund strategy dedicated to climate change.

Back then, in August 2018, Erlandsson told AMWatch that bond investors are too passive when it comes to using their immense muscle in the fight against climate change.

Some two months later, Erlandsson resigned from the company after disagreement over the structural set-up of some funds.

Want to save the planet? Take a closer look at your bond portfolio