EP Monthly

EP Insight, December 2021 | General Mills: Sustainability-Linked Bonds in Practice

General Mills (GIS:UN) is a manufacturer and marketer of packaged foods such as Cheerios, Häagen-Dazs, Pillsbury and more. 

Sustainability-Linked Bonds (SLBs), commonly referred to as Green Bonds, are having a breakthrough year. Less than six months into 2021, issuance of SLBs had already surpassed 2020’s total-year issuance. As capital flows into SLBs, understanding what they are and learning how to evaluate them will allow for more nuanced conversations on the utility of SLBs.

Recently, General Mills became the first U.S. investment grade consumer packaged goods company to issue SLBs that are directly linked to the company’s efforts to combat climate change. General Mills’ SLBs support projects that underpin their commitment to reduce greenhouse gas emissions by 30% across their value chain by 2030. Such projects will include increasing energy efficiency at plant locations, shifting to renewable electricity, and continuing to improve General Mills’ regenerative agricultural practices, as highlighted in a previous EP Insight.

As defined by the Sustainability-Linked Bond Principles (SLBP), SLBs are “any type of bond instrument for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined Sustainability/ESG objectives.” This means bond issuers are explicitly committing to execute improvements in sustainability outcomes within a predefined timeline.

In order to ensure SLBs deliver on their commitments, the SLBP provides a five-component framework that aims to increase a bond’s integrity by recommending best practices for structuring, disclosure, and reporting. By utilizing the SLBP’s framework, bond issuers can improve the transparency, accuracy, and integrity of information disclosed to investors. For companies who are dedicated to improving their environmental impact, the SLBPs provide an opportunity to leverage debt markets in order to help accomplish their sustainability goals.

If you’re interested in reading more about corporate work to lower environmental impacts, please see our resources page for other EP Insights from Terra Alpha.