DHL Group, which integrated sustainability targets into its business strategy at an early stage, is now taking it a step further by linking the company’s sustainability goals to its long-term financial instruments.
To this end, the company has introduced a framework that allows it to issue sustainability linked bonds.
The framework enables the issuance of debt instruments such as bonds with coupons linked to the achievement of the company’s aspirational CO2 emissions reduction target. Depending on DHL’s performance toward net-zero emissions logistics, the interest rates of the sustainability linked debt instruments can change.
“I truly believe that integrating our sustainability targets into our financing strategy accelerates the green transformation of DHL Group,” said chief financial officer Melanie Kreis. “The Sustainability-Linked Finance Framework is an important milestone that shows our commitment toward permanently reducing our company’s carbon footprint. Furthermore, our framework is designed to serve as a financial incentive to deliver on our environmental ambitions. This creates trust and transparency for our customers and investors.”
For the issuance of the debt instruments, DHL Group will use its absolute annual CO2 emissions as a key performance indicator to determine interest payments. In doing so, the company is stressing the urgency to decarbonize the entire logistics sector and underscores its commitment toward reducing its greenhouse gas emissions to below 29 million tons of CO2e by 2030.
This emissions target is in line with the Paris Agreement and was validated and approved through the Science-Based Targets initiative (SBTi) in October. In 2017, the company announced its goal to reduce all logistics-related emissions to net zero by 2050. In doing so, DHL Group is contributing to the Paris climate protection agreement’s goal of limiting global warming 1.5 degrees Celsius and also supports the United Nations’ Agenda 2030.
Going forward, the framework can also be used for other long-term debt issuances. Missing its ambitious interim environmental target by 2030 will result in higher interest rates to be paid to debt investors. The concrete terms and conditions will depend on individual debt issuances.
At the same time, DHL Supply Chain has developed a carbon neutral real estate portfolio of 400,000 square meters to support customers’ growth requirements across six European Tier 1 markets.
All buildings will have modern technical specifications, reflecting a campus concept and become mission-critical hubs for DHL Supply Chain and its national and international customers. The 14 units, constructed across 10 development sites, are located across major logistics markets in Germany, the Netherlands, Sweden, Finland, Italy and Poland. All buildings will meet key sustainability criteria.
“The development of 400,000 square meters of carbon neutral warehouses is an important strategic step as we aim to meet our customers’ growing demand for more sustainable warehouse space in strategic markets,” Hendrik Venter, CEO of DHL Supply Chain EMEA, said. “All assets we develop are underpinned by excellent fundamentals, be it sustainability, digitalization, location, demographics or tenure. Connectivity or proximity to key sales markets help us improve delivery times for our customers, while a close eye on the surrounding social factors and communities in which we operate help us to generate attractive jobs ensuring us access to a loyal and capable workforce. These factors help us and our customers to be even more successful and lead the way into a more sustainable future.”
For a first tranche of this warehouse portfolio, DHL Supply Chain has found an investor and strategic partner, Allianz Real Estate, acting on behalf of several Allianz Group companies.
Set to be completed between the first quarter of 2023 to the first quarter of 2024, the warehouses will represent one of Allianz Real Estate’s largest single logistics sector acquisitions, in terms of gross leasable area. DHL Supply Chain will occupy at least 85 percent of the facilities developed for Allianz Real Estate on long-term leases post completion.
“We are very proud to be able to offer our clients effective growth opportunities, with warehouses that are not only located in core markets and fulfill our clients’ needs, but also meet the highest ESG and sustainability criteria,” said Joe Mikes, global head of real estate solutions at DHL Supply Chain. “This enables us and our customers to create business opportunities that are compatible with our Sustainability Roadmap, which aims to make every aspect of the supply chain more sustainable, which of course also includes our real estate. We are very much looking forward to many more such projects in the future.”
DHL Supply Chain was advised commercially by JLL and was represented legally by DLA Piper.