Let nobody say that Mondelēz hasn’t embraced ESG. The company just raised billions of dollars of cheap cash by labelling their bond issuance as ‘green’.
The multinational with the cringing slogan of ‘snacking made right’. A tagline that has to make it on my least favourite list, beating out past winners like vacuum company, Electrolux, with ‘Nothing sucks like an Electrolux’, or Uzbekistan Airways honest slogan – ‘Good Luck!’.
But Mondelēz, the same company that just recently lobbied the EU to slow down ESG legislation, has had an epiphany. Chris McGrath, VP & Chief of Global Impact & Sustainability boldly stated in their press release:
Snacking Made Right is part of everything we do at Mondelēz International. Now more than ever is the time for companies to do what’s right and drive more sustainable business growth, ESG investment is a critical element of that mission
I wonder, however, if the target beneficiary of doing what’s right in this context, is Mondelēz’s own Executives and shareholders.
Bloomberg did some research into green bonds, including the one by Mondelēz and this is what they found.
Mondelēz’s borrowing costs for its inaugural green bond were lower than they would have been for conventional bonds, according to the data analyzed by Bloomberg.
We are now able to go to issuers and tell them ‘if you issue your debt in green format, you will actually save money,’ meaning that the hurdles we had to overcome for our clients to issue green bonds are now gone,” said Henrik Johnsson, co-head of investment banking EMEA at Deutsche Bank in London. “We are in a Goldilocks moment.”
We can assume the company didn’t pull the €2bn number out of the air, so there must be a plan on how these funds, which must be allocated to specific ESG spending, are going to be used. I hope the company will soon release details of the planned expenditure so that we can assess the potential impact and understand if this is ‘new’ money being allocated to green projects.
Here’s what Mondelēz says in their press statement:
The eligible project categories – environmental management of living natural resources and land use, more sustainable water and wastewater management, pollution prevention and control, renewable energy, energy efficiency, and clean transportation – are designed to protect and regenerate the environment and are in alignment with the United Nations Sustainable Development Goals.
If this is a new planned investment, the company should update their ESG targets to reflect the new cash injection, else, if this was cash that had already been allocated, and the business is just taking advantage of cheap rates, then that should be explained.
Mondelez’s borrowing costs for its inaugural green bond were lower than they would have been for conventional bonds.
The first option is preferable, but either is acceptable business practice. There is, however, a third, less favourable option in which the company diverts money from the named qualifying activities to cover non-ESG expenses. This is easily done by allocating grey costs, such as salaries, travel, and capital expenditure, for example.
This is not a criticism of Mondelēz specifically, but an observation of the widely reported abuse of green bonds and ESG investment in general.
Here’s what the Financial Times had to say about Green Bonds last year:
The rapid growth of the green bond industry is fanning suspicions that some debt is environmentally friendly in name only…15 per cent of such bonds are issued by companies “involved in controversial practices that contravene environmental standards”.
Although there are a number of really positive improvements among the big chocolate company’s, the industry has systematically failed in several key areas, including alleviating farmer poverty, forced labour, and deforestation – each of which, to some degree has a dependency on the other.
So, while I welcome more investment in solving these problems, I’d like to see a little less lecturing on the importance of ESG from the companies that did too little for decades. If Mondelēz is sincere, then they should build trust by publishing details of how they plan to spend the money, setting out the key persistent metrics to measure performance, and naming the executives who will be accountable for the delivery.
I do wonder about the accountability of spending within Green Bonds? Is that something auditors are required to separate out in their report? If there is a mechanism for tracking the use of funds, I’d like to see Mondelēz stand by their words, and I’ll be first in line to congratulate them.
