Fashion and design brands company H&M Group announced the issuance of a €500 million sustainability linked bond, with a maturity of 8.5 years, and an annual coupon rate of 0.25%. Demand for the bonds was particularly strong, with the offering 7.6x oversubscribed.
Helena Helmersson, CEO of H&M Group, said:
“Our customers are showing on a daily basis that they appreciate H&M Group’s offering with the best combination of fashion, quality, price and sustainability. Today’s successful bond issue is proof that the financial market also values our ambitious sustainability work and we look forward to working together for a sustainable industry.”
Sustainability linked securities are an emerging form of sustainable finance instruments, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. The instruments have been gaining significant popularity by issuers and investors. Last week saw two record-breaking sustainability-linked deals from AB InBev and the Carlyle Group.
H&M’s new bonds are linked to three of the company’s sustainability targets, including goals to increase the share of recycled materials used to 30%, reduce emissions from the group’s own operations by 20%, and reduce absolute Scope 3 emissions from fabric production, garment manufacturing, raw materials and upstream transport by 10%.
Adam Karlsson, H&M Group CFO, said:
“For H&M Group, sustainability is an integral part of our operations. This type of bond creates a clear and transparent commitment and incentive for the company. It is an important step in our continued work to optimise the company’s capital structure, while at the same time providing investors with an opportunity to contribute to positive transformation of the fashion industry.”
Sustainalytics provided a second party opinion on H&M’s sustainability linked bond framework. Evan Bruner, Project Manager, Sustainalytics, said:
“Sustainalytics is of the opinion that the H&M Group Sustainability-Linked Bond KPIs are relevant and material to the issuer and that the SPTs are ambitious and impactful. The goal to reach 30 percent recycled materials as inputs is a highly ambitious SPT (Sustainability Performance Target) and represents leadership in the clothing industry.”
SEB acted as sole sustainability structuring advisor and joint bookrunner for the deal, together with BNP Paribas, Commerzbank, Danske Bank and Standard Chartered.