Starbucks has issued a $1 billion sustainability bond, the company’s largest to date. Proceeds from the bond will go to projects designed to assist coffee farmers and build a more robust and sustainable supply chain, as well as to the company’s “Greener Retail” initiative.
The $1 billion sustainability bond is the largest ever in the global coffee sector. Starbucks issued its first sustainability bond, at $500 million, in 2016. At the time, it was considered an innovative means of corporate financing for sustainability projects. The company followed that up in 2017 with another corporate sustainability bond, worth 85 billion yen (approximately $773 million, as of this writing) on the Japanese market.
It is the proceeds from each of these bonds that are earmarked for the related sustainability initiatives, giving shareholders an opportunity to invest in sustainability-focused initiatives while still receiving returns on their investments through the life of the bond. This latest $1 billion sustainability billion bond — which is actually part of a $2 million bond package that includes a $1 billion general corporate bond — has a repayment term of 30 years.
“We are very pleased to see that our new Sustainability Bond attracted significant investor interest and was oversubscribed,” Starbucks CFO Patrick Grismer said in an announcement of the bond issuance last week.
The sustainability bond will include investments on two sustainability fronts: support for coffee farmers to help build a stronger coffee supply chain; and greener retail.
In the first category, Starbucks plans to further grow its in-house coffee certification program called CAFE Practices. The company plans to also invest in its various farmer support centers throughout the world, and to offer new and refinanced loans to coffee farmers through its $50 million Global Farmer Fund.
Through a relationship with the Zurich, Switzerland-based development investment firm Responsability the bond will also fund a $20 million invest investment to provide debt financing to coffee producer organizations in Latin America, Africa and Asia, according to Starbucks.
Starbucks announced last September that it plans to design, build and operate 10,000 “Greener Stores” globally by 2025 — despite the idea that aggressive brick-and-mortar retail growth is the very antithesis of environmental sustainability.
Starbucks said the store growth plan will follow an open-source framework that the company developed in partnership with the World Wildlife Fund and SCS Global Services that will improve energy efficiency, renewable energy, water stewardship, waste reduction and more.
Bond proceeds will also support Starbucks’s efforts to develop greener cups and packaging, the company said.
According to the bond terms, Starbucks will be publishing annual updates on its website of the allocation of the proceeds until they’ve been fully allocated to each project meeting the eligibility criteria.