Coffee seller Starbucks has issued a 30-year $1bn Sustainability Bond, which will be partly used to invest $20m into responsAbility Investments AG, as part of its Starbucks Global Farmer Fund that is refinancing loans to coffee farmers to replace old for new trees, buy new equipment and take other action to improve quality and productivity.
Previous bonds were issued in 2016 and 2017. Over time the funds raised by the issuance are intended to ensure coffee can be bought under verified Coffee and Farmer Equity (CAFE) Practices, to facilitate continued development and operation of Farmer Supp[ort Centers and agronomy R&D centres in coffee growing regions globally.
"We are very pleased to see that our new Sustainability Bond attracted significant investor interest and was oversubscribed," said Patrick Grismer, cfo of Starbucks. "The bond demonstrates Starbucks commitment to meaningful, continual progress toward our aspiration of sustainable coffee, served sustainably. It also illustrates a trend toward heavier interest from investors in our socially and environmentally focused projects - in this case supporting coffee farmers and leading in green retail."
Grismer added that Starbucks leadership in social and environmental responsibility "is a defining element of who we are as a company. Our intent is that, by issuing a Sustainability Bond, we're providing investors an opportunity to participate in our sustainability efforts, and our hope is that this inspires others to pursue more sustainability-related investing opportunities."
The latest bond issued is also intended to support the company's Greener Stores initiative, which was announced in September 2018. This is intended to "design, build and operate 10,000 Greeener Stores globally by 2025" the company said. Such stores are focused on energy efficiency, renewable energy, water stewardship and waste reduction, along with developments into 'greener' cups and packaging.
Sustainalytics provided a "second party" opinion on the bonds, Starbucks stated. The projects being targeted by the capital raised are linked to priorities outlined in the UN SDGs and the 2018 Sustainability Bond Guidelines. According to Green Bond Principles, the company must report on how the funds are spent and the impact made. An annual update of the allocation of the capital raised will be published, until such time that all the money raised has been fully allocated to projects meeting the eligibility criteria.
Morgan Stanley acted as sustainability structuring agent and joint book runner on the issue.
Dolph Habeck, head of ESG Debt Syndicate at Morgan Stanley, said: "The market capacity to raise $1bn of earmarked funds directed to Starbucks existing and new sustainability objectives, including the design, construction and operation of 10,000 Greener Stores globally by 2025, demonstrates increasing awareness and growth of support of sustainability objectives amongst the investor community."
The 30-year bond formed part of a larger bond offering totalling $2bn. The other $1bn is intended for general company purposes, including buying back 'common stock' as part of a previously communicated policy of targeting a $25bn shareholder return.