Starbucks Issues $500M Sustainability Bonds

(3BL Media/Justmeans) – Sustainability bonds are used to finance projects with a social impact, but they differ from the more prevalent green bonds, which fund environmental projects. According to Bloomberg, 21 sustainability bonds have been issued globally since 2012, which have raised $4.6 billion. The majority of issuers until now have been development banks and financial firms, rather than corporations.

Starbucks has issued bonds to raise $500 million to pay for sustainability projects, including support programs for farmers in coffee-growing regions. Research firm Sustainalytics gave the second opinion for the sustainability bonds. The 10-year, 2.45 percent senior notes will fund programs that ensure coffee is grown and distributed in a way that can be maintained over the long run, such as providing fair pay for workers and protection for wildlife.

According to Starbucks CFO Scott Maw, the company had initially looked into issuing a green bond to support some of its environmental and eco-friendly retailing projects. But in the process of speaking with banks, it learned about the option to issue a sustainability bond. The sustainability bond issue was significantly oversubscribed and attracted interest from a diverse group of socially focused investors outside its normal investor base.

In addition to financing coffee purchases, the bond will support a $50 million loan program that helps farmers rotate their crops and fund a network of eight farmer-support centers for suppliers in Rwanda, Tanzania, Colombia, China, Costa Rica and other countries. Proceeds also will go toward maintaining crop stability and sustainable farming practices.

In addition, bond proceeds could support the company’s efforts to develop coffee plants resistant to drought and a fungus that causes coffee leaf rust. Starbucks will publish annual updates on the use of the sustainability bonds’ proceeds until they have been fully allocated to projects.

The company’s coffee standards include 140 different requirements for sustainable sourcing. Conservation International then verifies that its coffee has been grown and delivered sustainably. Out of the 551 million pounds of coffee Starbucks purchased last year, 99 percent met its ethical sourcing standards.

Source: Bloomberg; WSJ

Image Credit: Flickr via World Agroforestry Center