Global retail giant H&M has today issued a €500 million, sustainability-linked bond, which it says provides incentives for the company to meet a series of environmental targets by 2025.
The sustainability-linked bond, which was 7.6 times oversubscribed, is actually new on the market and, unlike green bonds, are directly linked to a company meeting defined sustainability targets.
For H&M these targets are related to use of recycled materials, reduction of indirect scope 3 greenhouse gas emissions in its supply chain as well as carbon reductions in its own operations.
Hennes & Mauritz AB plans to join a growing pool of issuers of bonds with coupons tied to targets aimed at protecting the environment when it makes its bond market debut.
Sustainability-linked bonds offer access to the low-cost ethical debt market, while avoiding the restrictions found in traditional green bonds on how the funds can be spent. H&M would join issuers including Tesco Plc, LafargeHolcim Ltd. and Chanel Ltd. that have tapped the tiny, but fast-growing SLB market.
“It’s a stronger commitment to link financing to targets instead of linking it to specific use of proceeds and the company believes that the timing and market conditions are very good,” H&M representatives said in an emailed response to Bloomberg News questions. “There is a very big demand for sustainably-linked bonds and the terms are expected to be very favorable.”
The offering is managed by BNP Paribas SA, Commerzbank AG, Danske Bank A/S, Skandinaviska Enskilda Banken AB and Standard Chartered Bank Plc.
The company’s aim is that, by 2030, all of its materials will either be recycled or sourced in more sustainable ways. That compares with 57% in 2019, according to the latest available data from the firm.
H&M warned in late January that it would be difficult to make a profit this quarter due to lockdowns. The clothing retailer cut 16,000 full-time jobs during the past fiscal year as it pushed ahead with the biggest-ever reduction in its store network.