H&M is planning to part with a sustainability bond market

A dress made of Renewcell’s Circulose material in the H&M Conscious Exclusive collection for spring / summer 2020. H&M.

Hennes & Mauritz AB plans to participate in a growing pool of bond issuers with coupons tied to goals aimed at protecting the environment when it debuts in the bond market.

The Swedish clothing retailer hired banks to arrange a € 500 million ($ 607.1 million) offer of eight-and-a-half-year bonds, according to a person familiar with the matter, who asked not to be identified because they were not authorized to talk about it. The bond will be structured in a way that will encourage H&M to increase the use of recycled materials and reduce greenhouse gas emissions, the person said.

Sustainability bonds provide access to the ethical debt market at low cost, while avoiding the constraints found in traditional green bonds in terms of how the funds can be used. H&M will join issuers, including Tesco Plc, LafargeHolcim Ltd. and Chanel Ltd., which has leveraged the small but fast-growing market for sustainability-related bond.

“It is a stronger commitment to target financing rather than to specific use of the proceeds, and the company believes that timing and market conditions are very good,” H&M representatives said in an email response to Bloomberg News questions. “There is a very high demand for sustainably linked bonds, and the terms are expected to be very favorable.”

H&M plans to hold a group investor call at 13 GMT today. The offering is managed by BNP Paribas SA, Commerzbank AG, Danske Bank A / S, Skandinaviska Enskilda Banken AB and Standard Chartered Bank Plc.

The company’s goal is that by 2030, all materials will either be recycled or retrieved in more sustainable ways. That compares with 57 percent in 2019, according to the latest available data from the company.

H&M warned in late January that it would be difficult to make a profit this quarter due to the lockdown. The clothing retailer reduced 16,000 full-time jobs over the past fiscal year as it pushed ahead with the largest reduction ever in its store network.

By Maciej Onoszko and Leo Laikola

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