Starbucks Corporation announced on Monday that it completed the underwriting of an initial public offering of senior notes, including its first-ever U.S. Corporate Sustainability Bond.
The Seattle-based coffee giant said it will use the proceeds from $500 million in 2.45% Senior Notes due in 2026, to help enhance the company's sustainability programs centered around its coffee supply chain management programs through a variety of eligible sustainability projects. The initiatives include coffee purchases from third-party suppliers who comply with Starbucks' ethical sourcing verification program of Coffee and Farmer Equity (C.A.F.E.) practices, as well as the development and operation of farmer support centers in coffee growing regions. In addition, the proceeds will be used to help facilitate short and long-term loans made through the company's Global Farmer Fund.
"Coffee is at the core of our business, and we intend to continue to finance initiatives that will make a positive social and environmental impact in our coffee supply chain, as well as other areas across our business," said Scott Maw, Starbucks' chief financial officer. "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."
Starbucks is differentiating this sustainability bond, which will be used to fund projects with social impact, from “green bonds,” which companies such as Apple and financial institutions including Bank of America, JPMorgan, Barclays and Morgan Stanley have issued to fund environmental projects. As Maw told Bloomberg, Starbucks considered going the green bond route but decided on sustainability bonds, as sustainable sourcing is “inseparable from what we do. It’s really the only way we source coffee and we thought financing that supported and encouraged that core practice of ours would be helpful.”
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Sustainalytics, a leading global provider of environmental, social and governance (ESG) research and ratings, delivered the second opinion for the Sustainability Bond. This independent review offers investors additional insight into the proposed projects to be funded by the bond, as well as the expected positive environmental and social impacts of these projects. Sustainalytics also rates Starbucks as an ESG leader in both overall and relative performance to its peers.
“Improving the efficiency and effectiveness of coffee farming practices helps to strengthen the overall sustainability of the coffee supply chain while advancing the socioeconomic conditions of coffee farmers,” said Simon MacMahon, Sustainalytics’ EVP of Advisory Services. “Starbucks has a significant influence on the global coffee market and is an industry leader when it comes to supply chain standards and sustainability initiatives. We are excited to support Starbucks Sustainability Bond and applaud their efforts to advance sustainability practices throughout their value chain.”
Starbucks will publish annual updates of the allocation of the proceeds throughout the term of the sustainability bond until the proceeds have been fully allocated to projects meeting the eligibility criteria. These updates will be reported publicly and may include additional descriptions of select projects funded with sustainability bond proceeds, and, where possible, their environmental and/or social impacts.
Starbucks says it invests significantly in its comprehensive approach to ethically sourcing its coffee each year, including supporting coffee farming communities, mitigating the impact of climate change, and supporting long-term crop stability and farm sustainability. The company operates a network of eight farmer support centers around the world (Rwanda, Tanzania, Colombia, China, Costa Rica, Indonesia, Guatemala and Ethiopia), and has a commitment to provide $50 million in farmer financing in the form of short- and long-term loans. Starbucks also purchased a coffee farm in Costa Rica and has turned this into a global agronomy center. All of this is grounded in the company’s open-sourced C.A.F.E. Practices, developed with Conservation International over 15 years ago, which helps to ensure that the methods used in growing and processing coffee are efficient, effective and sustainable, both environmentally and socially. In 2015, 99 percent of Starbucks 551 million pounds of coffee purchases were verified as ethically sourced and Starbucks became a founding member of the Sustainable Coffee Challenge — a call to action to make coffee the first sustainable agricultural product in the world.