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Author: Don Obrien

Finance Chiefs Urge More Companies to Link Debt to Sustainability Goals


A group of finance chiefs from large international companies is urging peers to tie more of their companies’ financing to corporate sustainability goals.

Chief financial officers from 60 companies including beer maker

Anheuser-Busch InBev SA,

energy company

Enel

SpA and telecommunications firm

Verizon Communications Inc.

this week committed to linking about half of their corporate financing, including corporate bond issuances, to environmental, social or governance targets by 2025. That figure stood at 27% at the end of 2020, according to the group.

The CFOs are members of a task force formed in 2019 to support the United Nations’ Sustainable Development Goals, which include taking action against climate change and ending poverty. The announcement took place at this week’s U.N. General Assembly in New York City.

The members of the task force also pledged to invest $500 billion in projects that advance the U.N.’s sustainable development goals by 2025. The group expects that sum to increase as it works to recruit new members to the group.

“The idea is to expand the group to make sure it’s as representative as possible of a broader set of companies and sectors and countries,” said Fernando Tennenbaum, AB InBev’s chief financial officer.

Several of the taskforce’s members, including Enel, U.K. grocery chain

Tesco

PLC and Swedish fashion retailer H&M

Hennes & Mauritz

AB, have recently issued sustainability-linked bonds. Unlike green bonds, which have to be used for designated environmental projects, sustainability-linked bonds can be used for general purposes. The interest rates on the bonds adjust based on whether a company meets a set of predetermined sustainability targets.

The market for sustainability-linked bonds has grown over the past year, alongside broader increases in ESG debt issuance. Companies have raised $49.7 billion in proceeds from sustainability-linked bonds so far this year, up from $3.6 billion during the same period a year earlier, according to Refinitiv, a data provider.

AB InBev expects to add sustainability targets to its next corporate bond issuance, Mr. Tennenbaum said. He declined to provide details on when the beverage company could raise funds. AB InBev earlier this year took out a $10.1 billion sustainability-linked loan. The five-year revolving credit facility includes pricing that adjusts based on whether it meets targets tied to improving water efficiency and increasing renewable energy usage.

“Given what we’ve learned for our sustainability-linked loan and the expertise that we’ve gathered, it makes total sense to do the same with our bonds,” Mr. Tennenbaum said.

The CFO task force is working with its members on defining its own sustainability targets as well as developing case studies on how companies are integrating ESG goals into their operations and capital markets activity, members said.

Scott Mather,

chief investment officer for U.S. core and sustainable investments at financial firm Pacific Investment Management Co., said the task force is actively recruiting more CFOs to the group. With more members, the group will be able to make larger commitments, he said.

“If we’re successful in growing the network, then hopefully we can jump-start even more activity,” Mr. Mather said.

Write to Kristin Broughton at Kristin.Broughton@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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