Sustainability-linked bonds are a new phenomena on the market of sustainable bonds. In contrast to “traditional” green/sustainability bonds, where the funds are linked to specific projects, sustainability-linked bonds are coupled to the issuing entities meeting a number of defined sustainability targets, e.g. lower carbon emissions.
“For H&M Group, sustainability is an integral part of our operations. This type of bond creates a clear and transparent commitment and incentive for the company. It is an important step in our continued work to optimise the company’s capital structure, while at the same time providing investors with an opportunity to contribute to positive transformation of the fashion industry,” says Adam Karlsson, CFO in a H&M pressrelease
The H&M Sustainability-Linked Bond is a landmark transaction in many respects, as it not only represents the first ever Nordic EUR Sustainability-Linked Bond offering, but also the first ever Sustainability-Linked Bond bought by the European Central Bank.
"There is a fantastic interest in the market for Sustainability-Linked Bonds right now and this first transaction was just the starting point of a trend that we expect to grow in 2021. We had a number of questions on investor behaviour in regards of the format, I think all those questions was answered by the blow-out investor interest in this inaugural H&M Sustainability-Linked Bond offering. As we track the migration of fund flows from normal bond funds to ESG-bond funds, there was no surprise that this would be a success – but 180 accounts and EUR 3.8bn in final books at these levels is nothing but fantastic!", says Lars Mac Key, Head of Sustainable Bonds at Danske Bank.
The targets that H&M Group has committed to achieving by 2025 are:
- Increase the share of recycled materials used to 30 percent.
- Reduce emissions from the Group’s own operations by 20 percent.
- Reduce absolute Scope 3 emissions from fabric production, garment manufacturing, raw materials and upstream transport by 10 percent.