Pilgrim’s Pride issues $1B sustainability-linked bond

Source: fooddive.com

Dive Brief:

  • Global meat and poultry company Pilgrim’s Pride has announced a $1 billion sustainability-linked bond tied to the company’s Sustainability Performance Target (SPT) of reducing its greenhouse gas emissions by 30% by 2030.
  • The interest rate on Pilgrim Pride’s new bond will climb 25 basis points if the company fails to prove through a third-party verification service that it hit its sustainability targets, Bloomberg reported.
  • The bond is tied to Pilgrim Pride’s Sustainability-Linked Bond Framework, which details the company’s plan for reducing emissions pursuant to the Paris Agreement to keep global warming below 2 degrees Celsius by 2050.

Dive Insight:

Pilgrim’s Pride’s new $1 billion sustainability-linked bond is the company’s attempt to put its money where its mouth is when promising improved practices. With many consumers opting for brands with bright sustainability halos, corporations are announcing new pledges to reduce greenhouse gas emissions, improve animal welfare or boost worker conditions at an increasing rate. 

Consumers are spending more on products that make a sustainability claim, according to a report from IRI and the NYU Stern Center for Sustainable Business. Even at the start of the pandemic, dollar sales of sustainability-marketed products jumped 56% during the week ending March 15, 2020, thanks to millennials, college-educated and higher-income urban buyers. And 78% of consumers want companies to explain more about how their products affect the environment, according to a survey from Kearney.

But some stakeholders are questioning the intent behind the announcements, and whether they are truly altruistic or simply greenwashing. For example, according to Greenpeace, none of the CPG companies that have made anti-deforestation commitments have shown significant progress on eradicating the practice from their supply chains. This includes Kellogg, Kraft Heinz, Danone, General Mills, Nestlé, PepsiCo and J.M. Smucker.

Research is starting to show that sustainability-linked bonds can add some legitimacy to corporate initiatives while saving the borrowers money. As more companies opt for the bonds, it drives up the prices and reduces yields, making it even cheaper for borrowers, too. As scrutiny increases around corporate initiatives and stakeholders demand proof of progress, sustainability-linked bonds could become a popular option for food manufacturers. 

PepsiCo has seen promise in the option, issuing a $1 billion green bond in October 2019. By December 2019, $447 million of the proceeds had been allocated to projects around sustainability including sustainable packaging, low-carbon vehicles for transportation and a solar-powered R&D facility in New York. And in February 2021, AB InBev announced it had signed a new $10.1 billion sustainability-linked loan revolving credit facility, calling it the first of its kind among publicly traded alcohol beverage companies. 

Part of Pilgrim’s Pride’s motivation in launching the bond probably comes from its parent company and the world’s largest meat and poultry producer, JBS, which recently pledged to reach net-zero greenhouse gas emissions by 2040. Pilgrim’s Pride also claims to have reduced greenhouse gas emission intensity in its U.S. and Puerto Rico operations by 33% from 2010 to 2015 and by an additional 15% from 2015 to 2019. 

Pilgrim’s Pride also claims to have reduced its UK and Northern Ireland emission intensity by over 77% since 2010. It has also cut its electricity use while being open about its increased water use despite a goal to reduce intensity by 10%.  Its relative success in these areas could be part of what motivated the company to tie its continued progress to a $1 billion bond.

Many other food manufacturers are trying to move the needle in terms of their environmental impact and public perception. Tyson Foods launched the sustainability-focused Coalition for Global Protein in January 2020, with a goal to meet the world’s growing protein needs while addressing issues like conservation and food waste.

In December 2020, Nestlé announced plans to invest 3.2 billion Swiss francs ($3.6 billion) over the next five years to cut its greenhouse gas emissions in half by 2030 and reach net-zero emissions by 2050. The effort includes switching to 100% renewable electricity at its 800 global locations by 2025, promoting regenerative farming practices and adding more plant-based items to its offerings. Unilever has also made a major commitment to increasing plant-based sales and cutting food waste.