CFOs Commit to Linking Debt to Sustainability

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CFOs of more than 60 global companies have linked about half of their companies’ funding to environmental, social and governance (ESG) goals. All are part of a United Nations task force that has pledged to link half of all funding to ESG targets by 2025, reports the the Wall Street newspaper.

The companies, including Verizon Communications Inc, Anheuser-Busch InBev SA and energy company Enel SpA, have all pledged to tie around half of their debt, which includes corporate bond issues, to sustainability targets. Currently, collectively linked debt stands at 27% at the end of last year.

Some members of the group, such as Enel, Tesco PLC and H&M have also issued sustainability bonds, which can be used for anything but have a variable interest rate depending on whether the company meets its targets. sustainable development agreed. This is a market that has grown over the past year alongside other widespread ESG debt issuance; So far this year, companies have raised $ 49.7 billion in sustainable bonds, up from $ 3.6 billion in the same period last year, data provider Refinitiv reported.

The task force is currently targeting the rest of their industries by recruiting new members and increasing investment in UN sustainability goals.

“The idea is to expand the group to ensure that it is as representative as possible of a wider set of companies, sectors and countries,” said Fernando Tennenbaum, CFO of AB InBev .

SPDR invests in ESG bonds

SSGA currently offers a bond ETF with an ESG perspective, the SPDR Bloomberg SASB Corporate Bond ESG Select ETF (RBND). The fund replicates the Bloomberg SASB US Corporate Ex-Controversies Select Index and offers a sampling strategy that generally has the same risk and returns as the index.

The index measures the performance of high quality corporate bonds issued by companies with certain ESG qualities and also presenting the risk and return qualities of the parent index, the Bloomberg Barclays US Corporate Index. The parent index includes fixed rate corporate bonds, taxable and denominated in US dollars. These bonds are issued by US and non-US industrial, utility and financial institutions with a maturity of one year or more and with a face amount of $ 300 million or more outstanding.

The index uses a Responsibility Factor (R-Factor) developed by SSGA to rate parent index companies based on ESG criteria. The R-Factor takes ESG and corporate governance factors into account when rating companies. It excludes companies that derive significant income from any of the following: extreme event controversies, controversial weapons, violations of the United Nations Global Compact, civilian firearms, thermal coal mining and the tobacco. Companies that do not have an R-Factor in the parent index are also deleted.

The securities in the index are weighted to maximize the R factor of the index while minimizing the total risk relative to the parent index.

RBND can be used as a building block for ESG investments and has an expense ratio of 0.12%.

For more news, information and strategy, visit the ESG channel.


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