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Compass Group raises almost £700m through sustainability-linked bonds

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Multinational food services company Compass Group has issued two sustainability-linked bonds, raising almost £700m to back sustainability projects across the food value chain. 

  • Compass Group has issued two sustainability-linked bonds, raising proceeds of £250m and €500m respectively, listed on the London Stock Exchange as a replacement to its previous Eurobond.
  • Sustainability-linked bond issuance is on the rise, with global issuance expected to reach $150 billion by the end of 2022.
  • As this trend crosses paths with the food sector’s increasing interest in green finance, we can expect to see further adoption of sustainability-linked bonds by company’s operating within the industry.

The bonds are listed on London Stock Exchange Main Market, appearing in a sub-category called the Sustainable Bond Market. They replace an existing €500m Eurobond, which is set to mature in January 2023. 

How will the proceeds be used?

Compass Group (LSE:CPG.L) established its net zero strategy in 2021 and secured its approval by the Science-Based Targets Initiative (SBTi). Among its commitments are a 46% reduction in its direct operational emissions and a 28% reduction in supply chain emissions by 2030, each from a 2019 baseline.

The group’s commitments to sustainability were further outlined through its development of a Sustainable Financing Framework, which defines how it will report on the allocation of proceeds from its sustainability-linked bonds. 

The framework requires a report to be submitted each year, outlining how all proceeds have been allocated as well as providing evidence of the social and environmental benefits achieved through each investment.

The proceeds from the recently issued bonds will be used to advance Compass’ progress towards its net zero goals, with a particular focus on reducing the emissions of its suppliers.

They will also be used to support a broader range of social and environmental initiatives, with Compass CEO Dominic Blakemore explaining that, “our teams are committed to reducing food waste, switching to more plant-forward menus, sourcing more sustainable products, and educating consumers about more sustainable food options.”

The core areas targeted for investment are:

  • Expenditure on food that is certified Sustainable, Fairtrade or Organic;
  • Expenditure on goods from local, socially diverse or minority suppliers;
  • Net zero oriented expenditure such as the costs of electrifying fleet, use of renewable energy, promotion of plant-based products, and investment in regenerative food production;
  • Food Waste reduction projects including measurement technologies and systems;
  • Tackling plastic waste, and the promotion of reusable items; and
  • Investment in healthy eating initiatives, including in unit education, labelling and staff training.

The rise of sustainability-linked bonds within the food sector

The market for sustainability-linked loans has expanded rapidly, with Moody’s ESG finding that by the end of 2022, global issuances will have reached $150 billion.

This growth is accompanied by an increasing interest in green finance within the food sector, driven, as demonstrated by the recent closure of a €100 million fund dedicated to improving the sustainability of food supply chains.

As these trends cross paths, we can expect to see further announcements of sustainability-linked loan issuances by corporate actors within the food sector.

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