Can you lend Starbucks $500 million? Coffee giant issues world's first Sustainability Bond
"Money talks...The global bond market is the show. It's a $60 trillion market." -Drew Wolf, Starbucks VP and Treasurer
That is what Starbucks VP and Treasurer Drew Wolf says about how we might focus global capital markets on the world's great social and environmental challenges.
Starbucks has a long history of engagement with sustainability, including a 15 year partnership with Conservation International (CI) to achieve 100% ethically-sourced coffee.....and also of criticism for its quickly expanding brand which can roll over local shops and launch millions of iconic cups into landfills (~4 billion/year according to EcoWatch, 2016) and shun Fair Trade standards for it's own "ethically sourced" label (which Starbucks says is a lesser standard compared to their C.A.F.E. standards developed with CI and implemented now by a third-party, SCS Global Services).
Starbucks recent business move to fund its efforts, issuing a new type of bond, is a first in the world and will be interesting to follow.
Starbucks Treasurer Drew Wolf on why they issued a $500 million "sustainability bond"
Wolf lays out the case that his job is to manage risk appropriately while providing financing for Starbucks' operations. The notion of a "sustainability bond" grew out of conversations about the possible use of "green bonds" (issuances of GB may reach $150b in 2017, Market Realist, 2017). Starbucks felt that green bonds were too narrowly focused on environmental criteria and they needed something that allows them to finance projects for their small holder farmers. Thus the "sustainability bond" was born.
A sustainability bond is essentially a debt financing instrument that allows a company to attract lenders who will help to fund business projects that improve social and environmental performance while growing the business.
Wolf explains that the benefits to Starbucks have been:
the ability to attract new types of lenders
building their brand awareness among ESG investors
internal employee engagement and moral (being the FIRST company to issue such a bond is a point of pride)
potential reductions or at least stability in the cost of capital
Let's follow the story to see where it goes. Finance is indeed a powerful instrument for good (and evil). I am current reading Nick Silver's Finance, Society and Sustainability on this very topic.