Following its launch in 2022 of two ‘sustainability-linked bonds’ (SLBs), Pernod Ricard has announced the refinancing of an existing €2.1bn loan with a new facility based on the same environmental commitments.
The wine and spirits giant has committed itself to a reduction in absolute greenhouse gas emissions (Scopes 1 & 2) on operated sites, and a reduction of water consumption per unit produced at its distilleries.
Under the rules of the SLB, if the borrower fails to meet its commitments, it is obliged to pay a higher interest rate to its bankers.
SLBs, while welcomed by those wanting to see industry moving towards Net Zero, are not the same as Sustainability Bonds where proceeds have to be used to finance or re-finance a combination of green and social projects or activities.
Sustainability-Linked Bonds (SLB)
Borrowing instrument in which the issuer is obliged to achieve certain sustainability criteria within a certain time frame, the proceeds are not ring-fenced to green or sustainable purposes. If a company does not meet the set targets, it must pay higher interest to its investors.
Financial instrument where the proceeds (or an equivalent amount) must be used to finance or re-finance a combination of green and social projects or activities.
Bonds that go to finance or refinance projects or activities with positive environmental impacts,
Bonds that must finance projects or activities that achieve a positive social outcome.
In 2022, CDP, a non profit focusing on sustainability, rated Pernod Ricard ‘B’ for ‘taking coordinated action on climate issues’ compared to an industry average of B-, while its implementation of best practices for water security earned the company an A- compared to a B for the Food and Beverage sectors. Moody’s ESG Solutions ranks Pernod Ricard “among the top three scored companies in the Beverage sector.”
Pernod Ricard’s new credit facility was facilitated by BNP Paribas and Crédit Agricole CIB which coordinated the ESG (Environmental, Social and Governance) aspects.