Amazon issued its first sustainability bond Monday, raising $1 billion to fund ongoing and new projects that “advance people and the planet,” including buying wind and solar energy and deploying new fleets of electric vehicles.
The financial instrument, which is part of a larger sustainable bond framework, enables investors to help it tackle important social and environmental challenges, the e-commerce Goliath explained, noting that it strives to be “Earth’s most customer-centric company, Earth’s best employer and Earth’s safest place to work.”
By issuing green, social or sustainability bonds, the Everything Store said it aims to finance social and environmental projects that “align with [its] sustainability priorities,” including private equity investments in renewable energy, clean transportation, green buildings, affordable housing and socioeconomic advancement and empowerment.
“It’s important that Amazon stimulate investment in the development of green technologies and low-carbon products and services that will enable companies of all sizes to decarbonize their operations,” Amazon said, adding, “we are committed to using our scale for good.”
The Seattle tech giant, which has pledged to power its operations with renewable energy by 2030 and achieve net-zero carbon emissions by 2040, joins a growing roster of debt issuers leveraging the market to clean up their supply chains.
Across all sectors, global issuance of green, social and sustainability bonds hit a high of $231 billion in the first quarter of 2021—a 19 percent increase over the previous quarter and more than three times higher than the same quarter last year, Moody’s Investors Service said Monday. Each of the three segments showed record volumes, with $99 billion of green bonds, $90 billion of social bonds and $42 billion of sustainability bonds issued.
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Sustainable bonds, which represented 9.4 percent of global debt issuance in the first quarter, the second-highest quarterly share on record, will likely fall within Moody’s expectations for an 8 percent to 10 percent share of total issuance in 2021, the financial firm said. The combined green, social and sustainability bond market, it added, is on track to outstrip Moody’s forecast of $650 billion for all of 2021.
Much of this trend has to do with larger forces at play, including a “rapidly evolving” policy and regulatory landscape that is placing sustainable finance “top of mind,” according to Matthew Kuchtyak, an analyst at Moody’s Investors Service’s ESG Group. Governments, he noted, are increasingly pursuing policies aimed at driving rapid decarbonization and promote green infrastructure. They’re also providing growing clarity about the criteria for activities to be considered sustainable as well as working in greater concert around sustainable finance initiatives.
“Sustainable bond volumes are surging this year given strong sustained interest among debt issuers and investors,” Kuchtyak said. “A heightened level of governmental policy focus on climate change and sustainable development globally will also spur further market growth and harmonization.”
Sustainability-linked bonds and loans, which aren’t pegged to defined sustainability projects but rather incentivize a brand’s achievement of predetermined performance indicators at a companywide level, are also gathering steam, Moody’s said. Sustainability-linked bonds leaped 57 percent to a new quarterly high of $8.6 billion, while sustainability-linked loans reached $97 billion in the first quarter, or 29 percent higher than the previous record from the fourth quarter of 2020, it said.
Sustainability-linked financial vehicles are gaining favor among the fashion crowd, too.
Prada became the first luxury house to embrace the scheme in 2019 when it closed a five-year, 50-million euro ($60.7 million) “sustainability term loan” rewarding the realization of certain sustainability thresholds—such as the number of stores that acquire a LEED Gold or Platinum certification—with lower annual interest rates.
In February, H&M rolled out an eight-year, 500 million-euro ($607.5 million) sustainability-linked bond—which was nearly eight times oversubscribed—to create a “clear and transparent commitment” for it to increase its share of recycled materials by 30 percent, reduce emissions from its operations by 20 percent and pare back Scope 3 emissions from fabric production, garment manufacturing, raw materials and upstream transport by 10 percent by 2025.
Though the Swedish retailer had considered issuing a green bond, it ultimately opted for a sustainability-linked one because the latter proved to be a “better fit,” Nils Vinge, head of investor relations at the company, which also owns the & Other Stories, Cos, Monki and Weekday brands, previously told Sourcing Journal. “In our view, the sustainability-linked format, compared to traditional green bonds, gives more flexibility to invest where the money makes the most impact in order to meet the ambitious targets we have set out.”
There’s also been plenty of appetite from clothing purveyors for green bonds and loans that connect to specific targets.
Chanel, for instance, raised 600 million euros ($729 million) through its BNP Paribas-supported bond issue last September to help it transition to 100 percent renewable energy across all owned facilities by 2025 and halving its Scope 1 and 2 greenhouse-gas emissions by 2030. Adidas says it will funnel the proceeds from its eight-year, 500-million-euro ($596.9 million) bond, which also debuted last September, into recycled materials, renewable energy production and “various initiatives to create lasting change for underrepresented communities.”
In February, VF Corp., which owns The North Face, Timberland and Vans, announced it will be deploying the 493 million euros ($598.9 million) in net proceeds from its inaugural green bond, which it launched in 2020, to a raft of sustainability projects, including procuring more sustainable materials, planting 2 million trees and saving hundreds of millions of liters of water through conservation efforts.