The old adage “money talks” has a new currency in business. That’s because consumers – some 87% of them – are increasingly saying that corporate sustainability impacts their attitudes and behaviors. As a result, businesses are investing heavily in sustainable initiatives, even turning to a new category of financial instruments to finance them: Corporate Sustainability Bonds, or “green bonds.”
Starbucks kicked off the trend in 2016, issuing half-a-billion dollars in US Corporate Sustainability Bonds, the first of their kind. Why? As their Chief Financial Officer said at the time, “Issuing a bond focused on sustainable sourcing demonstrates that sustainability is not just an add-on, but an integral part of Starbucks, including our strategy and finances.”
Creating a stronger bond with consumers
That CFO’s comment about being “more than an add-on” lies at the heart of the move to green bonds, which serve as a new, and much deeper, proof point to consumers. For years, it seemed enough for corporations to project an image of sustainability. New research, however, shows that consumers are looking for more. While the Boomer generation demands sustainability primarily for environmental reasons, Millennials want that benefit plus a more personal payoff: greater quality. As a recent report noted, “Consumers today increasingly view sustainability and corporate responsibility … as aspects of quality, not just a “feel-good factor.”
In some categories – such as restaurants – a proven commitment to sustainability is even emerging as a price of entry. The above-mentioned study, from 2017, says that “sustainability consumers are more likely to dine out at fast casual restaurants and coffee shops relative to the general population, suggesting that sustainability likely plays a more important role in those locations.”
Creating global financial impact
While green bonds are still fairly new, they build on previously introduced instruments such as bonds issued specifically for environmental initiatives or others for social responsibility efforts. The significant difference is that Corporate Sustainability Bonds combine both concerns, and address consumer as well as financial marketplace demands.
Their impact is being felt well beyond the US market, in which the Starbucks bonds were issued. One European survey report concludes that “the green bond market … has become, quicker than many think, a core part of global fixed income. And more importantly … it can be a sustainable market in its own right, one driven by real demand rather than a desire to demonstrate sustainability credentials.”
Sustainability, the new marketplace must-have
Green bonds still have much room to grow, but they have already signaled a fundamental shift in corporate attitudes. No longer can sustainability be dismissed as a marketing buzzword or badge of good corporate citizenship. With an important new role in the bond market, it’s quickly becoming seen as essential for sustaining business.
Starbucks: Starbucks Issues First US Corporate Sustainability Bond
scottmadden.com: First Corporate Sustainability Bonds Issued in US
Hartman Group: Sustainability 2017 research report
Euromoney: Green Bonds Survey: What Investors Want