Jacobs Ties Debt Cost to ESG Goals with Inaugural $500 Million Sustainability-Linked Bond
Technology, consulting, and business solutions company Jacobs announced today the completion of its inaugural sustainability-linked bond offering, raising $500 million, with interest rates on the ten-year bond tied to the company’s diversity and climate goals.
The offering follows the recent publication by the company of its Sustainability-Linked Bond Framework, which the company said forms a “crucial element” of its sustainable business strategy, PlanBeyond 2.0. Jacobs launched the strategy in 2021, aimed at integrating sustainability throughout its operations and client solutions in alignment with the United Nations Sustainable Development Goals (SDGs).
The strategy is focused on six core SDGs: Good Health and Well-Being (SDG 3), Clean Water and Sanitation (SDG 6), Innovation, and Infrastructure (SDG 9), Reduced Inequalities (SDG 10), Sustainable Cities and Communities (SDG 11), and Climate Action (SDG 13).
Under the framework, the specific goals linked to the bonds’ interest rate include the company’s targets to achieve at least 40% female representation in VP and above positions by the end of fiscal year 2027 (FYE September), and to reduce absolute Scope 1 and 2 emissions and Scope 3 emissions from Business Travel, Employee Commuting, and Upstream Fuel by at least 70% by the end of F 2029, on a 2019 basis. Jacobs’ current female VP and above representation is 28%.
If the targets are not met, the interest rate on the bond will increase by up to 0.25%, with an initial 0,125% step up as of September 2028 if the diversity target is missed, and a second increase in September 2030 if the emissions goal is not reached.
Jacobs CFO Kevin Berryman said:
“As part of our PlanBeyond 2.0 business strategy, we developed six Sustainable Business Objectives to sit at the heart of our company strategy, and this offering, which follows the refinancing of our credit facilities as sustainability-linked loans, was the next step in our journey. This new Framework demonstrates our commitment to incorporating inclusion, innovation and inspiration into the very fabric of the company, defining our aspirations for how we as an organization and as individuals can each play a part in creating a sustainable future for all.”
Sustainability-linked debt has been one of the fastest growing areas of sustainable finance, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. Corporate interest in sustainability-linked loans has grown rapidly, as the financing provides flexibility to use proceeds for general corporate purposes, while with instruments such as green bonds, raised funds can only be allocated to specific categories of green projects.
Following an extended period of rapid growth, however, SLB issuance slowed sharply in late 2022, with Moody’s Investors Service citing factors such as growing market scrutiny on the credibility and robustness of issuers’ SLB targets, and the sector’s exposure to high-yield issuance.