AFRICA – Diversified miner Anglo American has issued its first sustainability-linked bond, including performance targets to reduce greenhouse gas emissions and freshwater abstraction, and to support job creation in host communities.
This €745 million (US$743.77m) bond is the first instrument issued following the publication of Anglo American’s Sustainability Financing Framework and bond investors will be entitled to a higher final coupon payment should the company not meet certain targets.
The bond includes performance targets to reduce Scope 1 and 2 greenhouse-gas emissions by 30% by 2030, compared with the 2016 baseline, and freshwater abstraction in scarce areas by 50% by 2030, compared with the 2015 baseline. The bond matures in September 2032.
The financing mechanism will see a coupon increase of 40 basis points accruing from September 2031 for each of the selected KPIs that do not achieve its target or if the verification of the target being achieved has not been published.
Anglo American’s Sustainability Financing Framework has been established in accordance with the Sustainability-Linked Bond Principles (SLBP) 2020 administered by ICMA (International Capital Market Association) and the Sustainability-Linked Loan Principles (SLLP) 2022 administered by the LMA (Loan Market Association).
These are voluntary guidelines that outline best practices for financial instruments to incorporate forward-looking sustainability performance outcomes and promote the development and preserve the integrity of the sustainability-linked bond and loan markets.
Anglo American’s Sustainability Financing Framework covers bonds, loans and other financing instruments and links the company’s funding requirements to stretch goals set out in its Sustainable Mining Plan.
Anglo’s is not the first such bond in South Africa.Earlier this year Harmony Gold announced it had secured multi-tranche loan facilities which included three sustainability-linked loans related to green power and water use targets.
Sustainability-linked bonds are a bond instrument where certain features vary based on whether the issuer achieves pre-defined sustainability goals within a timeframe.
Unlike green, social and sustainability bonds, these are not use-of-proceeds bonds earmarked for specific purposes. They fund general corporate purposes.
Most of these sustainability-linked bonds have featured goals relating to emissions reductions, renewable energy generation, recycling and better waste practices. These are challenges that every business has.
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