Toyota Financial Services (TFS) announced the issuance of a $750 million diversity and inclusion (D&I) bond, in support of Toyota’s D&I platform goals. The bond is the sixth D&I bond since 2013 and brings the cumulative total of such issuances to $3.75 billion. What is less clear is how the funds are deployed.
TFS touts its D&I bonds as helping build relationships with diverse underwriting firms, including minority- and women-owned firms, to help expose them and their investor base to high profile deals.
Other than improving access to TFS bonds for minority communities, the D&I bond appears to do little to raise Toyota’s diversity profile. Most of its D&I platform goals involve being ranked highly in surveys, with little clarity about what that is supposed to reflect.
Toyota (JPX:7203) provided little insight into the use of proceeds for the D&I bonds, stating only that these bonds are a component of the company’s comprehensive funding program. TFS is the financing arm of the automaker in the US, offering leasing and retail auto financing, and payment protection (insurance) products.
The company has also raised $7.5 billion in green bond financing since 2014, aimed at supporting the sale of its electric vehicles, but not for any green-only projects.
Toyota’s D&I claims don’t go much beyond opening up financial markets
The issuance of six diversity and inclusion bonds appear to do little to improve D&I internally at Toyota, although they do provide access to financing and investing in its high profile bonds.
Little has changed to enhance gender and racial diversity at the highest levels in the company – there is only one (Japanese) woman among nine members on the board of directors of Toyota.
Additionally, there is only one other woman serving on the audit and supervisory board, along with five men, and only one among the fifteen senior operating executives. The latter executive serves as the Chief Sustainability Officer.
The company also announced an update about three new appointments to its Diversity Advisory Board (DAB), although two were to replace outgoing members. The role of the DAB is to work with senior leadership to help drive the adoption of best practices and ensure executive accountability.
Toyota’s Prius and future EV not aimed at minority buyers
While the use of proceeds was unclear, serving as a component of the funding program for its auto finance arm could extend to extending the marketing of its products to the minority community.
Yet the typical buyer of a Toyota Prius, its most popular hybrid EV model, is an older male baby boomer, earning over $96,000 annually, compared to the average median household income in the US of around $67,500.
Toyota’s head of North American Sales has expressed scepticism over the US government’s plan to have EVs account for 50% of cars sold in the country by 2030. He cited high prices for EVs, a lack of readiness in the market and in charging infrastructure, and the lag (25 years) to achieving 10% market share for hybrid EVs as reasons.
A recent consumer poll showed US voters supported the transition to EVs by a large margin, while a Department of Energy study showed that while challenging, infrastructure expansion to meet demand is possible.
As for price points, the Chevy Bolt by General Motors (NYSE:GM) is priced below $30,000, which becomes even more affordable when adding recently extended state and local credits of $7,500.
Further, nationwide sales of EVs have already reached 5% in the first-half of 2022, and could exceed the 10% share achieved by BEVs (often viewed as a compromise technology until EVs reach maturity) well before 2030.
Toyota’s ESG profile found lacking on E and S issues
Toyota’s ESG profile has also been called into question by analysis from Greenpeace which shows that 90% of its manufacturing facilities were at high risk from climate change, well above the 44% average for all global automakers. Heat, water stress, and inclement weather were listed as the top three threats, exposing worker safety as a top social risk.
A lack of transparency in the use of proceeds for its D&I bonds, and the predominant allocation of green bond proceeds to selling EVs under the guise of enhancing green mobility will do little to improve its ESG rating.