Corporate green-bond issuance has reached new highs as U.S. companies including chip maker Micron Technology Inc., retailer Walmart Inc. and data-center company Equinix Inc. add the bonds as part of larger traditional bond offerings.
The increasing issuance of green bonds, which finance environmentally friendly projects, comes as companies face pressure from investors, regulators and employees to show the steps they are taking to improve the environment. One way they do that is by issuing debt tied to sustainability targets.
More companies are adding green bonds as tranches in bigger offerings, a reflection of strong investor demand and the fact that investment banks have created dedicated sustainability groups, according to Matt Toole, director of deals intelligence at financial data provider Refinitiv.
“It’s certainly becoming a go-to part of the financing world,” Mr. Toole said.
U.S. companies raised $47.04 billion in proceeds by issuing green bonds this year through Oct. 29, 65% more than the same period last year, according to Refinitiv. The total amount raised by companies so far in 2021 exceeds the prior year as a whole, when companies raised $32.7 billion, Refinitiv said.
Technology companies such as Amazon.com Inc., Salesforce.com Inc. and Alphabet Inc. over the past year have included a different type of project-finance bond, known as a sustainability bond, as part of larger corporate offerings. Sustainability bonds finance projects that include both green and social projects, such as affordable housing.
Boise, Idaho-based Micron Monday closed on a $1 billion green bond. The company plans to spend the proceeds on projects to increase its usage of renewable energy and make its buildings more energy-efficient, among other priorities, the company said. The green bond, due for repayment in 2032, is part of a larger $2 billion offering. The other two traditional bonds included in the offering—a 20-year and 30-year bond—refinance existing debt.
Micron last year committed to spending $1 billion over the next seven years on environmental projects. The company originally planned to finance those projects with a $750 million green bond and use cash for the remainder. But it raised its offering to $1 billion after seeing strong demand from investors for the debt.
“Fixed-income investors are looking for opportunities to make investments that are green-related projects,” Chief Financial Officer David Zinsner said. “We were aligning with what I think the fixed-income market was looking for.”
Bentonville, Ark.-based Walmart in September issued a $2 billion green bond to fund projects related to renewable energy, water efficiency and natural habitat restoration. The company said at the time that the bond is designed to signal its commitment to achieving 100% renewable energy by 2035 and net-zero carbon emissions in its operations by 2040. The green bond was a tranche in a larger $7 billion offering.
“Becoming a regenerative company is a journey. This green bond signals that we continue to make headway,” Kathleen McLaughlin, Walmart’s chief sustainability officer, said in a press release tied to the Sept. 23 announcement.
Equinix, a Redwood City, Calif.-based data center landlord, in May issued a $1 billion green bond, its third such offering, as part of a larger $2.6 billion offering. The company said at the time that it plans to use the proceeds from the green bond offering to fund projects related to renewable energy, waste management and other related priorities.
Micron is paying a 2.703% interest rate on its bond. The company estimates that it received an interest-rate discount worth five one-hundredths of a percentage point on the green bond compared with what it would have received in a traditional bond offering, due to strong demand, according to Mr. Zinsner.
The timing of Micron’s green bond announcement coincides with the United Nations climate change conference, known as COP26, in Glasgow. The company earlier this year also refinanced a revolving credit facility and term loan to include interest rates that are tied to sustainability targets.
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