Sustainability-linked bonds are a new trend in the bond market. In contrast to green bonds, where the money is earmarked for specific projects, sustainability-linked bonds are linked to how well the company meets a number of defined sustainability targets.
H&M is now joining this trend with the issuance of a sustainability-linked bond of EUR 500 million with a tenor of 8.5 years. It is linked to three targets, and if H&M falls short of meeting these, the company will have to pay an interest rate premium to the bondholders.
The targets that H&M has committed itself to meeting by 2025 are:
- to increase the share of recycled materials to 30 per cent
- to reduce emissions from its own operations and from purchases of electricity and heat by 20 per cent from 2017 level
- Reduce the total emissions from raw materials, fabric production, clothing manufacturing and transport by 10 percent.
SEB acted as sole sustainability structuring advisor and joint bookrunner together with BNP Paribas, Commerzbank, Danske Bank and Standard Chartered.
SEB played a similar role when the Norwegian shipping company Odfjell in January issued a sustainability-linked bond tied to the company reaching its target to reduce the fleet’s carbon intensity. It was the first public sustainability-linked bond issued in the Nordic countries and first ever in shipping.