Google owner issues largest corporate sustainability bond in history
Google's parent company Alphabet Inc. has issued $5.75bn (£4.4bn) in sustainability bonds, in what it claims is the largest sustainability or green bond issued by a corporation to date.
While the proceeds from green bonds are typically used to fund projects which minimise a company’s environmental footprint, sustainability bonds cover social sustainability issues as well.
For projects to receive support from the bond, they must fall into one of the eight priority categories identified by Alphabet: energy efficiency, renewable energy, green buildings, clean transport, circular economy and design, affordable housing, racial equality, and support for small businesses in the wake of Covid-19.
On energy efficiency and renewable energy, Google has made strides in improving the energy efficiency of its data centres in recent years and claims they are now twice as energy-efficient as typical enterprise data centres. It has been matching its total annual energy consumption with renewables since 2017 and last September signed a package of 18 wind and solar deals.
The clean transport projects will help Google integrate electric vehicles (EVs) and cargo bikes into its global fleet, following successful pilots in California’s San Francisco Bay; while the circular economy and design funding will be used to accelerate progress towards Google’s recycled content and recyclable devices targets.
Alphabet said in a statement that it will follow the Green Bond Principles and Social Bond Principles to ensure that the projects financed by the bond package deliver meaningful impacts. The firm will report annually on the projects that have been funded from the bonds’ proceeds, as well as their impact to date and expected future impact.
“Sustainability bonds are an emerging asset class and we hope this transaction will help develop this new market,” Alphabet’s chief financial officer Ruth Porat said.
“The proceeds from these sustainability bonds will fund ongoing and new projects that are environmentally or socially responsible and enable investors to join us in tackling critical issues. We believe that these investments benefit our communities, employees and stakeholders, and are an important part of fulfilling Google’s mission and goal of creating value over the long term.”
A pivotal moment for green finance
IHS Markit is forecasting that the world economy will shrink by 5.5% in 2020, as a result of Covid-19. This contraction is around triple that felt during the 2008-9 financial crash, with most financial researchers also expecting a slower recovery.
Concerns around the state of green finance and of funding for low-carbon projects are, therefore, understandably rife. The International Energy Agency (IEA) has warned that only six of the 46 technologies it classes as key to the energy transition are receiving adequate levels of funding and policy support. The majority of British businesses are reportedly planning to pause or downscale investment in initiatives which will decrease their environmental footprint.
But the pandemic seems to have placed a renewed focus on ESG or impact investing – particularly the ‘social’ aspect. JP Morgan recently polled investors from 50 global institutions, representing a total of $12.9 trillion in assets under management on how they expect Covid-19 to impact the future of ESG investing. 71% said it was likely to accelerate action.
Similarly, edie has explored what green finance will look like post-pandemic with a string of experts, with the overarching conclusion being that a coupling of economic, social and environmental metrics and ambitions is the likely path.
Google said its own sustainable bond package is already "significantly oversubscribed".
edie's Sustainable Investment Digital Conference
edie is launching its first bespoke sustainability conference focused on green finance, with experts from ING, BlackRock, BNP Paribas and more set to discuss investment and the green recovery at the Sustainable Investment Digital Conference on 7-8 September 2020.
The two-day digital event will feature a myriad of expert panel discussions, breakouts and deep dives into key green finance themes - plus opportunities to network virtually with delegates.
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