Sustainability-linked financial instruments have been gaining the attention of investors worldwide in recent years. The likes of green bonds, blue bonds (related to oceans), climate bonds, social bonds and even plastic waste reduction bonds – aimed at achieving positive economic outcomes – are all pulling in big money from major players.
And it’s not just bonds: sustainability-linked loans (SSLs) are quickly becoming de rigueur, exampled by the eye-watering $10.1bn sustainability-linked revolving credit facility announced by AB InBev in February.
Unlike a green loan that is used to finance a specific green purpose, SLLs use a pricing mechanism that incentivises improvement in areas aligned with the company’s 2025 sustainability goals, meaning the loan is cheaper if the borrower achieves certain ESG (environmental, social and governance) related targets.
The use of SLLs grew rapidly in 2019, with companies around the globe raising $62bn in SSLs in the first nine months, surpassing 2018’s full-year total, according to Bloomberg data.
A business imperative
General Mills has now thrown its hat into the ring, renewing its five-year $2.7bn revolving credit facility with a pricing structure tied to environmental impact metrics. The move makes the Cheerios maker the first US consumer packaged goods company to implement a sustainability-linked revolving credit facility.
According to the company, the pricing adjustment focuses on its progress in two key areas – its reduction of greenhouse gas emissions and the transition to renewable electricity – during the credit facility’s term.
“For General Mills, regenerating the earth’s natural resources is both a business and environmental imperative,” said Kofi Bruce, General Mills’ chief financial officers.
“Integrating General Mills’ environmental impact metrics into this financing structure underscores our commitment to drive resilience for the planet, its resources and its people.”
The amendment extends the maturity of the credit facility to 2026 and includes 20 of the company’s banking partners. Joint lead arrangers and joint book runners include BofA Securities (also sustainability coordinator), JPMorgan Chase Bank, Barclays Bank, Citibank, Deutsche Bank Securities and BNP Paribas.
“We applaud General Mills for the leadership they have shown in using the sustainability-linked loan market to demonstrate their commitment to ESG and corporate responsibility,” said Steven Nichols, head of ESG Capital Markets for the Americas, BofA Securities.
Headquartered in Minneapolis, US, General Mills generated fiscal 2020 net sales of $17.6bn – along with non-consolidated joint venture net sales of $1bn – from bestselling brands like Nature Valley, Betty Crocker, Pillsbury and Fiber One, among others.