Tesco's first sustainability-linked bond more than six times oversubscribed
Tesco attracted more than Є5bn of investor demand for its first sustainability-linked bond (SLB), priced at Є750m, according to official advisor BNP Paribas.
The supermarket announced on Wednesday (20 January) that it had launched the bond – the first in the company’s history whereby rates and interest will vary according to progress in tackling climate change. BNP Paribas is acting as the Joint Sustainability Structuring Advisor and Joint Bookrunner on the SLB, which has an 8.5-year maturity.
Rates and interest will drop if Tesco delivers strong progress against its climate targets relating to Scope 1 (direct) and Scope 2 (power-related) emissions. Tesco is striving to bring emissions from these sources down by 60% by 2025 and 80% by 2030, against a 2015-16 baseline. In a statement, the company revealed that emissions from these sources is now 50% lower than in 2015/2016, following investments in energy efficiency, onsite solar panels and renewable energy power purchase agreements (PPAs).
Tesco’s progress to tackle Scope 3 (indirect) emissions is not linked to the bond. However, as a company with a net-zero roadmap underpinned by a 1.5C-aligned science-based targets framework, it does have targets in this space. A headline ambition is cutting supply chain emissions by 35% by 2030.
“Linking our financial strategy to our long-term commitment to tackle sustainability is an important step in ensuring that this commitment is embedded across all our business operations and ensures we are driving continuous improvement,” Tesco’s chief financial officer Alan Stewart said.
“We are proud to be making good progress on our journey to be a net-zero carbon business in the UK by 2035 and for the entire Group by 2050.”
The move from Tesco comes after the business established a £2.5bn revolving credit facility whereby rates and interest are tied to progress on emissions, renewable power and food waste late last year. This agreement was facilitated by BNP Paribas and Natwest. The facility has a three-year term.
Nestle is splurging on sustainability
In related news, multinational food and beverage giant Nestle has announced plans to double sustainability-related spending through its Nescafe coffee brand, allocating more than 700 million Swiss francs (Є650m) through to 2030.
Funding will be allocated to help boost supply chain transparency, in light of Nescafe’s commitment to have all coffee traced back to farming groups by 2025, and to investing in the technologies, education, skills and materials needed to deliver a net-zero value chain. Nescafe, like its parent company, is targeting net-zero by 2050.
A pot will also be set aside for sustainable packaging. Nestle is aiming to ensure that all of its packaging is recyclable or reusable by 2025 and to reduce its virgin plastic use by one-third within the same timeframe.
The funding will also help to deliver on a promise to pay bigger premiums to farmers who produce coffee beans using sustainable methods. Some 60% of wild coffee species are estimated to be at risk of extinction due to the twin climate and nature crises, including Arabica, which accounts for almost two-thirds of global production. This problem is exacerbated by poor practices on farms, which reduce soil quality and biodiversity.
Hear from Tesco edie's Sustainability Leaders Forum
From 2-4 February 2021, edie's award-winning Sustainability Leaders Forum event is returning in a brand new virtual format.
This event will allow you to be connected with peers via face-to-face via video chats; be inspired by high-level keynote talks from industry leaders; be involved in a series of interactive panel discussions and live audience polls; and be co-creative in our interactive workshops, whilst also meeting leading technical experts in our dedicated virtual exhibition zone. Rooms, expo booths, private chats, bespoke stages and backstage passes – it’s all possible.
Tesco's head of environment Anna Turrell will be taking part in the Sustainability Skills Seminar on the final day of the event (4 February).
For a full agenda and to register now, visit: https://event.edie.net/forum/