Tesco launches first sustainability-linked bond

Tesco has launched its first bond that is linked to commitments to reduce greenhouse gas emissions.

The €750m bond is the first bond of its kind to be issued by a retailer and sets a tangible incentive for environmental and social performance. The issuance follows an announcement in October 2020, that Tesco has established a £2.5bn revolving credit facility, with interest linked to the achievement of three 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 per cent by 2025 against Tesco’s 2015 Baseline.

The bond will 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.

Alan Stewart, CFO, Tesco 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 global business to set a zero-carbon goal in 2009 and later the first FTSE 100 company to set science-based carbon reduction targets on a 1.5C trajectory and has a goal of becoming a net-zero carbon business in the UK by 2035. The company has already achieved a 50 per cent reduction in Group GHG emissions against a 2015 baseline as well as sourcing 97 per cent of electricity from renewable sources.

Tesco was advised by BNP Paribas, Citi, MUFG, RBC Capital Markets (B&D), Freshfields Bruckhaus Deringer LLP and Allen & Overy LLP.

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