Logistics and shipping giant Deutsche Post DHL Group announced today the introduction of a Sustainability-Linked Finance Framework, enabling the company to issue sustainability-linked bonds, in a move described by DHL as creating “a direct relation between its sustainability strategy and its financing strategy.”
Sustainability-linked securities, which are designed to incentivize issuers to deliver on sustainability goals with terms tied to the performance towards the targets, are the fastest growing segment of the sustainable finance market. According to a recent report by Moody’s, the sustainability-linked bond market surged 10x in 2021 to $90 billion of issuance.
Sustainability-linked bonds issued by DHL under the new framework would have coupon payments tied to the company’s performance against its emissions reduction goals, specifically its commitments to reduce absolute Scopes 1 and 2 emissions by 42%, and to absolute Scope 3 emissions s from fuel- and energy-related activities, upstream transportation and distribution and business travel 25% by 2030, from a 2021 base year. If the targets are missed, DHL would be required to pay higher interest rates to investors.
The framework notes that the chosen Sustainability Performance Targets (SPTs) are commitments that were validated and approved by the Science Based Targets initiative (SBTi).
According to DHL Chief Financial Officer Melanie Kreis, the new framework “is designed to serve as a financial incentive to deliver on our environmental ambitions.”
“I am very happy about today’s announcement, as I truly believe that integrating our sustainability targets into our financing strategy accelerates the green transformation of Deutsche Post DHL Group. The Sustainability-Linked Finance Framework is an important milestone that shows our commitment towards permanently reducing our company’s carbon footprint.”
DHL unveiled its Sustainability Roadmap last year, which included plans to invest €7 billion over ten years in measures to reduce its CO2 emissions, with a focus on alternative aviation fuels, the expansion of the zero-emission e-vehicle fleet and climate-neutral buildings.
The framework received a Second Party Opinion from Sustainalytics, which rated the Scope 1 and 2 SPTs “Highly Ambitious,” and the Scope 3 SPT “Ambitious.”
Click here to access DHL’s Sustainability-Linked Finance Framework.