Green bonds are a small fraction of the $5.8 trillion US investment-grade corporate bond market but increasing in popularity as companies develop initiatives to combat climate change.
Tuesday 08, October 2019
PepsiCo has joined the charge to make green bonds more mainstream as the soda giant priced its debut sale of the debt, reported Bloomberg.
The company offered $1 billion of senior unsecured green securities and the 30-year bonds will yield 92 basis points above Treasuries, after initially discussing 110 basis points.
Pepsi plans to invest the proceeds in sustainable development goals as defined by the United Nations, including eco-friendly plastics and packaging as well as cleaner transportation. The packaged food and beverage company already has about $34 billion of debt outstanding, but this is its first green bond.
The company’s existing 30-year bonds due 2049 currently trade about 94 basis points wider than similarly dated Treasuries.
Investors had placed orders worth as much as $3.65 billion. Pepsi had been aiming to sell between $750 million and $1 billion of the bonds.
According to a bond prospectus Morgan Stanley, Goldman Sachs Group and Mizuho Financial Group managed the deal, with Morgan Stanley serving as a green structuring adviser.
Pepsi also stated that the proceeds from the deal are also marked for tree planting and for projects that will improve the company’s operational water-use efficiency.
Over $120 billion worth of green bonds were issued in the first half of 2019, up from $85 billion in the last six months of 2018.
Pepsi’s rival Coca-Cola earlier this year amended a loan issued in June 2015 to include a sustainability element, and both companies have pledged to use more recycled plastic in their bottles over the next decade.
Sustainable debt tools like green bonds are a potential way for beverage companies to fund transition activities toward a more environmentally and socially sustainable future.