This week leading Swedish personal care and forest products company Svenska Cellulosa AB (SCA) released their first green bond at SEK 1.5 billion ($232 million). It was issued in two tranches: one SEK 1 billion floating rate note at three-month STIBOR +0,68% and one SEK 500 million fixed rate tranche at 2.5%. The bond has been issued under the company’s Euro Medium Term Note program.
They had planned for SEK 1 billion but upsized to 1.5 billion on the back of strong investor demand. It sold to approximately 30 investors, mostly domestic. Local bank SEB was the lead manager.
The bond is linked to internal company projects for: renewable energy, fuel-switching (to biofuels), energy efficiency, waste & water management and sustainable forestry. A 'second opinion' has been provided by the highly reputable Centre for International Climate and Environmental Research - Oslo (CICERO). Mind you, that opinion is not (yet?) publicly available.
The bond is similar to the recent Unilever bond, in that it relates to internal projects and processes that improve the energy and resource efficiency of the company. No detailed information about actual projects/assets is so far available.
We do know that the biofuels will be derived from forest waste in their operations - so no food crops involved, which is good news. We also know that the forests are certified by the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification - boxes ticked.
But, in line with best practice as defined by the Green Bonds Principles, shouldn't investors expect more transparency about the projects than has been provided? In areas like energy efficiency we would expect issuers to specify targets or hurdle rates the projects must meet (as that other Swedish corporate green bond issuer, Vasakronan, has done).
The relative lack of upfront disclosure would normally tempt us to suggest this was a bit "light" green, but given CICERO's academic reputation and SCA's commitment to reporting to investors through their website, they have the benefit of the doubt - as shown by investor interest. Now to see how they report.
