General News: Retail and telecoms: the new industries driving a record boom in green bonds

Tough climate and energy targets have driven a record boom in sustainable bonds over the first half of this year as new industries tap the market for funds.

The latest firm to seek finance for climate-friendly projects is the Dutch grocer behind America’s Food Lion, Giant Food, Hannaford, and Stop & Shop supermarket chains.

MarketWatch has learned Ahold Delhaize (TICKER:AD.AE), which owns 2,000 stores across 23 states, will be the first food retailer to issue a sustainability bond in euros

It will seek to issue up to E750m of new paper to fund projects to reduce carbon emissions and food waste—marketing starts today (Wednesday) in London.

Its fundraising comes as new industries, such as retail and telecoms, enter the sustainable bond market.

Global sustainable bond issuance, which includes green, social and sustainability bonds, reached a record $96.3bn this year to date, up 50% year-on-year from $64.3bn, according to data provided by Dealogic.

This year has seen a shift in firms taking the lead in the sustainable finance bond market, forced to find ways to meet tough climate and energy targets set by regulators, while 2018 was marked by the rise of financial institution issuers.

Anna Mándoki, an analyst at Dealogic wrote in a note that telecoms and retail were two new industries boosting the sustainable bond market.

“Companies around the world have revised their sustainability strategies to align with the climate and energy targets defined by the European Commission: to reduce greenhouse gas emissions, enhance the usage of renewable energy and increase energy efficiency by 2030 and further by 2050,” she wrote. “A number of corporate issuers are raising funds with these objectives, and time scales, in mind.”

As much as $7.2bn of sustainable finance bonds issued this year have a 10-year tenor, maturing in 2029, while $3.4bn of sustainable finance bonds will mature in 2049.

In a note issued yesterday (Tuesday) Morgan Stanley wrote: “Going forward, we believe that demand for green bonds can only increase, as US$90 trillion will be required for global infrastructure investment over the next 15 years to transition to a lower-carbon scenario.”

Jessica Alsford, head of Morgan Stanley’s Global Sustainability Research team, says companies, municipalities and countries are getting serious about building a low-carbon future, and they’re increasingly using green bonds to finance climate-friendly projects.

“Green bonds will be a key tool for getting there,” she said.

In documents seen by Financial News, Ahold Delhaize plans to use funds for a range of sustainable projects. These include investments in solar, wind, and geothermal energy as well as bio-digesters.

It will use retail store food waste as feedstock for its bio-digestors, as well as other waste streams. Energy efficient LED lighting in parking areas and freezer cabinets will be installed along with doors or curtains on cooling cabinets.

Other projects involve the installation of Urban Farms on store rooftops which will contribute to providing local sustainable products while lowering greenhouse gas emissions saved from reduced distribution costs.

The company says while the bond would help meet its green targets the fundraising is part of a broader mission. “We want to provide investors with the opportunity to directly support our growth in health and sustainability,” Frans Muller, chief executive of Ahold Delhaize told MarketWatch. “By issuing this first bond, we are further committing ourselves to invest in projects that promote sustainable business goals.”

Sustainable finance bonds by corporate issuers have been well received by the market in recent months.

Mándoki said: “Spanish Telefónica (TICKER:TEF.MC)’s $1.1bn issuance, the first green bond from the telecommunication sector in January, was five times oversubscribed. With the…results of the recent European Elections generating wins for Green political parties, sustainable issuance should continue to prosper.”

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