In finance and fashion, it’s good to be green.
The latest firm to join the green bond brigade is Walmart, which on Thursday said it closed on its $2 billion inaugural green bond offering. The net proceeds from the bond, part of a five-tranche $7 billion sale of new senior unsecured notes, will be used to fund current and prospective projects to advance the company’s sustainability goals.
The green bond marks the first offering under the Walmart’s Green Financing Network, which the company revealed last month.
“The closing of our first-ever green bond offering directs capital toward projects that will advance our environmental sustainability goals now and in the years to come. These goals include achieving 100 percent renewable energy by 2035 and zero emissions in our operations by 2040,” Kathleen McLaughlin, Walmart’s executive vice president and chief sustainability officer, said. “Becoming a regenerative company is a journey. This green bond signals that we continue to make headway. We remain steadfast in our commitment to addressing climate change, transitioning to a circular economy and restoring natural ecosystems, all while supporting the communities in which we operate.”
Projects eligible for funding via the green bond include renewable energy projects, such as micro grids and energy storage to reduce emissions and transition away from fossil fuel use; sustainable transport projects related to Walmart’s operations, supply chain or customers, such as electric, hydrogen and hybrid vehicles; zero waste and circular economy projects focused on waste reduction; and waste recycling for Walmart’s facilities, supply chain and in the communities where the company operates. Other projects that qualify include quality and efficient water stewardship projects, and habitat restoration and conservation.
Walmart said it would issue a public report with information on how the green bond proceeds will be used until the funds have been fully allocated.
Sometimes referred to as climate bonds, green bonds are fixed-income bonds sold to raise funds specifically earmarked to support projects that provide climate or environmental benefits. In effect, governments or firms selling the bonds are asking investors to pay for sustainability innovations and processes.
VF Corp. was the first in the industry to offer a green bond, closing on a 500 million euro ($586.8 million) offering in February last year. The net proceeds were earmarked for advancing sustainability programs that would drive “progress toward achievement of its recently announced science-based targets and sustainable materials vision,” it said. Funding eligibility criteria center on three areas: sustainable products and materials, sustainable operations and supply chain and natural carbon sinks, including reforestation conservation projects and investments in regenerative agriculture practices.
“The overwhelming interest in our green bond serves as an endorsement from the business community for our purpose-led agenda and focus on connecting business success with actions that improve lives and our planet,” Steve Rendle, VF’s chairman, president and CEO, said at the time.
Burberry and Chanel followed with similar initiatives.
Last September, Burberry said it would issue a medium-dated sustainability bond in which the net proceeds would be used to finance, as well as refinance, eligible projects that within the firm’s sustainability bond framework. The 300 million pound bond ($390 million) at a 1.125 percent interest rate is due Sept. 21, 2025. “This will be the first sustainability labelled bond issued by a luxury fashion company and will diversify Burberry’s sources of funding, introducing long-term financing into the company’s capital structure,” it said.
“Burberry has a longstanding commitment to sustainability and we are dedicated to using our position and influence to drive social and environmental improvements. The addition of medium-dated financing to the capital structure will support liquidity and allow us to secure proceeds for investment in our sustainability agenda over the life of the bond,” Julie Brown, chief operating officer and chief financial officer, said at the time.
Burberry this past June pledged to become the first luxury brand to become Climate Positive by 2040, pushing beyond its current 2040 net-zero target by investing in key initiatives to support wider climate change efforts beyond its value chain. It plans to achieve its new target goals by cutting emissions across its extended supply chain by 46 percent by 2030 and develop projects that support others in their own carbon journeys, it said.
Also last September, fashion house Chanel raised a 600 million euro bond ($699 million), with net proceeds targeting environmental goals centered around carbon reduction. The bond is comprised of two tranches, one for five years that matures July 2026 and the other for 10 years with a maturity date of July 2031. Both tranches are believed to have garnered investor interest and were said to have been oversubscribed.
Chanel’s bonds aren’t just earmarked for environmental goals, they’re also linked to making sure the fashion house achieves its emissions targets. If it fails, the brand will have to pay a penalty in the form of a higher interest rate on the bond for each tranche. Chanel’s sustainability goals include meeting a 50 percent decrease in its Scope 1 and 2 emissions by 2030, and then shift to 100 percent renewable electricity by 2025.
While luxury brand Prada didn’t issue a bond, the Italian firm in November 2019 became the first fashion company to ink a sustainability-linked loan with Crédit Agricole Group. The 50 million euro ($58.3 million) loan is for five years, and the terms allow for the interest rate to be reduced when certain sustainability targets are met. The company signed a similar sustainability loan deal a few months later with Mizuho.
Other fashion brands have since followed suit, with Ferragamo’s 250 million euro ($293.7 million) sustainability-linked loan in June 2020 and Moncler’s 400 million euro ($469.8 million) loan coming one month later.