Accelerating down the sustainability road(map)
Australian conglomerate Wesfarmers, who own well known Australian businesses including Kmart and Bunnings, recently issued the first sustainability-linked bond into the Australasian market.
A sustainability-linked bond commits the issuer to key environmental, social or governance targets, with penalty interest having to be paid to investors if the targets are not met. In the case of Wesfarmers they have committed to:
- Obtain all of the energy requirements for its Bunnings, Kmart Group and Officeworks retail businesses from renewable sources by the end of 2025.
- Achieve an average emissions intensity of its ammonium nitrate production plant to 0.25 tonne of carbon dioxide equivalent (CO2e) per tonne.
Harbour Asset Management, whose funds feature in many of our portfolio, were an investor in the bond and provide further details on the investment rationale in the linked article: https://www.harbourasset.co.nz/research-and-commentary/accelerating-down-the-sustainability-roadmap/
While this was the first sustainability-linked bond issued in Australasia, there have been a number of green bonds issued. A green bond is where proceeds are used to finance or refinance projects with clear environmental benefits. We view the use of both sustainability-linked bonds and green bonds as a positive one as investors and businesses work towards a more sustainable future.
