Two very different corporates, a tech giant and a petrochemical titan, took out sustainble bonds they didn’t really need this past week. In fact, the lack of urgency for borrowings might be all they have in common.
Yet the moves themselves speak to a shared future in securing finance and sustainability.
Amazon, the world’s e-commerce leader, announced a $1 billion sustainability bond issuance to fund green and social projects as part of $18 billion in borrowing that it doesn’t really need.
Meanwhile, Sibur, Russia’s largest petrochemicals producer, signed a deal for a $50 million sustainability-linked loan with UniCredit. The sum is marginal for Sibur, which has spent the past year gulping down massive cash flow increases after opening one of the world’s largest new petrochemicals plants. Its credit options are many.
Yet, both companies chose sustainability-linked instruments as funding sources. This indicates that future borrowing will likely be increasingly linked to ESG (environment, social, governance) metrics. As a carrot or a stick, things seem to be headed in this direction.
For the moment, the important thing is engagement. Sibur has shown that it is ready to cut its teeth, so to speak. The green loan deal will be the first of its kind for a Russian petrochemicals company.
The petrochemicals giant is ready to put its money where its mouth is to be a leader among Russia’s corporates in sustainable practices. The credit will come with a higher, or lower, interest rate depending on Sibur meeting sustainability targets which include green house gas reductions and increased use of recycled feedstock in PET production. Earlire this year, Sibur was ranked 8th in a Forbes list of Russia’s 30 most eco-friendly companies.
“ESG considerations and priorities are driving strategy formulation and factor into everything we do, all the way from production to financing decisions,” according to Peter O’Brien, member of the Management Board and Managing Director for Economics and Finance at Sibur.
Amazon has over $73 billion in what’s as good as cash already. It doesn’t really need the money – although no doubt has its reasons, math and leverage for borrowing. It is already a player in sustainability and green strategy.
Yet, just the same, the sustainability bond has specific targets. It will fund projects including renewable energy, clean transportation, sustainable buildings, affordable housing and socioeconomic advancement and empowerment. This could include electric vehicle acquisitions, charging station installations, building retrofits and education. The targets help achieve a stated goal of reducing greenhouse gases, among others.
Amazon is no stranger to these instruments, yet it continues to use them.
In Sibur’s case, the move represents a good faith step and closer engagement with the ESG trend. The company is closely-held and under no external pressure. It simply seeks to participate with the international financial community in environmental protection, circular economy and sustainability practices.
“As a company intent on being a leading contributor to the growth of the circular economy in its core geographies, we appreciate the importance of a responsible approach to disposing of and recycling used plastics, and it is something that plays into our strategic vision,” O’Brien said.
While a tech company and a petrochemicals producer may appear on opposite sides of the table in the “green” debate, in truth they aren’t. They are both trying to accomplish sustainability goals within their businesses. Access to financing that can help them accomplish their targets allows for a shared vision that can be quite effective in accomplishing tasks.
