The finance brand for Toyota in the United States, Toyota Financial Services (TFS), issued a new $1.6 billion asset-backed green bond, with proceeds aimed to finance the sale of environmentally friendly vehicles.

The new issue comes as companies worldwide are turning to sustainable finance tools to support ESG-related projects. A recent report from Moody’s indicated that green bond issuance in the first quarter of 2021 soared to a record $99 billion, and estimated that sustainable bond issuance for the year will exceed $650 billion, substantially greater than last year’s record $491 billion.

According to the company, net proceeds will be used for the acquisition of new retail installment sales contracts and operating lease contracts financing Toyota’s vehicles from model year 2020 or later. The vehicles have to meet eligibility criteria, including being either a hybrid, plug-in, fuel cell or battery electric vehicle. Conditions outlined for use of proceeds also specify tailpipe emissions criteria for the financed vehicles, and EPA-aligned vehicle smog ratings.

This offering marks the sixth green bond issue for TFS, bringing total green bond proceeds raised to $7.6 billion. The newest offering set the highest eligibility requirements for vehicle qualifications to date and is in line with Toyota’s goals of having 40% of new vehicle sales be electrified models by 2025 and by 70% by 2030.

Cindy Wang, TFS group vice president, said:

“TFS Green Bonds support the sale of environmentally friendly Toyota vehicles and provide an appealing option for socially-conscious investors, our latest Green Bond has our most rigorous eligibility criteria yet, demonstrating our commitment to continuous improvement in this space.”