Supermarket in green bond first

Tesco has become one of the first UK corporates to structure a green bond as it looks to drive its climate ambitions.

The supermarket chain has launched the €750m bond with a 0.375% coupon which offers an 8.5-year maturity and it is the first bond of its kind to be issued by a retailer.

Tesco CFO, Alan Stewart, said: “I’m delighted that we have issued our first sustainability-linked bond. Linking our financial strategy to our long-term commitment to tackle sustainability is an important step in ensuring that this commitment is embedded across all our business operations and ensures we are driving continuous improvement. We are proud to be making good progress on our journey to be a net zero carbon business in the UK by 2035 and for the entire Group by 2050.”

Tesco was the first business globally to set a zero-carbon goal in 2009 and later the first FTSE 100 Company to set science-based carbon reduction targets on a 1.5-degree trajectory.

“The launch of our first sustainability-linked bond further demonstrates the strength of our commitment to reduce our impact on the environment and become a net zero carbon business in the UK by 2035,” the firm said in a statement.

Tesco added the bond was “an important step in setting tangible incentives for our environmental and social performance”, and it follows the announcement in October 2020, that Tesco established a £2.5bn revolving credit facility, with interest linked to the achievement of three ambitious environmental targets.

The bond is aligned to an agreed Sustainability Performance Target (SPT) of reducing Scope 1 and 2 Group Greenhouse Gas (GHG) Emissions by 60% by 2025 against Tesco’s 2015 Baseline. It will also be aligned to Tesco’s newly introduced Sustainability-Bond Framework, which follows the ICMA Sustainability-Linked Bond principles, and has been independently assessed by Sustainalytics.

“As we work towards our targets, we have already achieved a 50% reduction in Group GHG emissions against a 2015 baseline as well as sourcing 97%1 of electricity from renewable sources,” the group explained. “In November 2020, we announced a partnership with Low Carbon to create three new solar farms and introduced a new fleet of electric delivery vehicles in London as part of our plan to go fully electric by 2030.”