Key Takeaways
- Ford’s $2.5 billion issuance is the largest green bond from a US corporation to date.
- A unique evaluation process ensures the bond’s alignment with Ford’s ambition to invest in all-electric versions of its most popular vehicles and prioritize disadvantaged communities in the transition to electric vehicles.
- The record-breaking bond is the first major transaction from Ford’s ‘first-of-its-kind’ Sustainable Financing Framework.
- The new framework has achieved the highest-possible ‘advanced’ ESG rating from Vigeo Eiris, a division of Moody’s which independently assesses sustainable financing frameworks.
For almost 118 years, Ford Motor Company has been a pioneer in the automotive industry. Now, the car giant is blazing a new trail to help finance its move towards a zero-emissions transportation future.
A New Record for US Green Bond Issuance
In November 2021, Ford issued the largest green bond to date by a US corporation raising $2.5 billion via a 10-year issuance. Guided by ambitious environmental and social goals, the green bond fits with the company’s emphasis on debt financing tied to sustainability goals.
Ford will allocate an amount equal to the net proceeds from the bond offering exclusively to clean, zero-emission transportation projects, including activities related to the sustainable design, development, and manufacturing of electric vehicle and batteries. The proceeds will also be directed to projects that prioritize and drive investments to disadvantaged communities and address the social impacts of the transition to electric vehicles.
The record-breaking issuance has been widely praised as a strong example of a genuine green bond with a unique valuation process. Ford will publish annual reports detailing progress and environmental and social impact of the projects funded by the bonds. It will also obtain a report from an independent third party who will examine and verify the management of the net proceeds and provide assurance on the projects funded.
In addition to external verification, a new sustainable financing committee established within Ford will assure that funded projects comply with Ford’s strategic sustainability plan.
RBC Capital Markets supported Ford’s effort to continue advancing its mission, providing strategic advice on capital structure optimization and sustainability finance in the months leading up to the offering, and was an active bookrunner on the green bond.
“We knew that sustainability was at the heart of Ford’s strategy,” says Jack Sconzo, Managing Director, Debt Capital Markets at RBC Capital Markets. “It’s integral to their mission, values and the way they govern their operations. The sheer scale of the $2.5 billion transaction makes the green bond unique, but it has an even larger strategic value for Ford.”
Setting a New Standard for Sustainable Financing
The bond is the first transaction from Ford’s ‘first-of-its-kind’ Sustainable Financing Framework. Positioned as an automotive industry first, the new framework covers environmental and social projects for unsecured and ABS funding transactions issued by Ford and Ford Credit.
Additionally, it will guide how projects are evaluated and selected, governing how proceeds are managed and how results are reported. Net proceeds from sustainable financings can be invested in four different areas – clean transportation, clean manufacturing, making lives better, and community revitalization.
The potential positive impact of the projects described in Ford’s new framework achieved the highest-possible ‘advanced’ rating from Vigeo Eiris, a division of Moody’s which makes independent assessments of organizations’ goals and performance against environmental, social and governance matters.
Among other expected benefits, initiatives outlined in the Sustainable Financing Framework are intended to help the company become carbon neutral no later than 2050. Ford was one of the first full-line U.S. automakers to pledge to reduce greenhouse gas emissions from its vehicles, operations and supply chain in alignment with goals of the Paris Climate Agreement. This pledge is backed by science-based interim targets the automaker intends to achieve by 2035.
“I think Ford’s Framework highlights the global trend towards sustainable financing,” says Moses Choi, Director, Sustainable Finance Group, RBC Capital Markets, “and the Green Bond is certainly a high-water mark for company initiatives that are good for people, planet and Ford. We stand ready to support that activity.”
With automakers increasingly under pressure to cut carbon emissions, Ford’s continued commitment to sustainability has been well received by both consumers, investors and sustainability advocates.
Ultimately, consumers will decide how quickly EV adoption will occur, but more investment and new products will help. 40% to 50% of Ford’s global vehicle volume is expected to be all-electric by 2030.
Driving Green Bond Growth
Sustainable debt is continuing to rise in popularity. In 2021, global sustainable debt issuance – green, social, sustainability, and sustainability-linked – surpassed $1.6 trillion in issuance. Corporate green bonds marketed in the US raised $58.2 billion in 2021 – more than double the total from 2020, when green-bond issuance totalled $27.1 billion in the US, according to Bloomberg.
As demand for sustainable debt continues to grow, companies in an increasing variety of industries are likely to approach the market with bond offerings. With the largest US corporate green bond to date, and a unique Sustainable Financing Framework to guide future transactions, Ford looks set to remain at the cutting edge of sustainable financing for some time.
