Mercedes-Benz announced today that it converted an €11 billion revolving credit facility into a sustainability-linked loan, with terms tied to climate-related goals aligned with the company’s sustainability strategy, Ambition 2039.
Sustainability-linked debt is 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.
Mercedes-Benz’s Ambition 2039 strategy envisions the company offering a carbon neutral car fleet by the end of next decade, including the achievement of a carbon neutral supply chain by 2039.
Earlier this year, the company said that it would increase its use of sustainability-linked finance instruments, as it unveiled a new series of climate goals, including plans to cut CO2 emissions per passenger car by more than 50% by 2030.
Mercedes-Benz’s new sustainability-linked loan has its cost of debt, through the loan’s commitment fee, tied to the company’s performance on a series of climate protection and carbon footprint reduction targets, such as the share of fully electric vehicles in the company’s fleet. The company said that the Key Performance Indicators (KPIs) for the loan were chosen through a materiality analysis, to focus on the most pressing ESG issues.
Steffen Hoffmann, Head of Treasury and Investor Relations of Mercedes-Benz Group AG, said:
“Our path towards a CO2 neutral future has been set out clearly with our Ambition 2039. We will therefore align our sustainable business strategy with our financing instruments and transform our existing Revolving Credit Facility into a Sustainability-Linked Loan. This follows on from our previous two green bond issues in 2020 and 2021 and paves the way for Mercedes-Benz to play a leading role in the area of sustainable finance.”