H&M’s Inaugural Green Bond Attracts ‘Strong’ Investor Demand
H&M Group announced Thursday that it has issued its first green bond in a bid to stoke its sustainability efforts.
The Swedish retailer said that its 500 million-euro ($530 million) offering, which has a maturity of eight years under its Euro Medium Term Note program, has generated “great” interest among a wide swath of institutional investors, resulting in an oversubscription of three-and-a-half times.
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Green bonds, like the ones The North Face owner VF Corp. has secured, are typically pegged to defined sustainability projects, compared with sustainability-linked loans, which incentivize a brand’s achievement of predetermined performance indicators at a companywide level, à la Prada Group.
The net proceeds from the bond will be earmarked for eligible products in five categories that the No. 2 apparel purveyor defined in its sustainable finance framework in September: circular economy, green buildings, renewable energy, energy efficiency and sustainable water and wastewater management.
“We are pleased to have been able to attract strong demand for our inaugural green bond from a large number of international investors,” said Adam Karlsson, chief financial officer at H&M Group. “The transaction extends H&M Group’s debt maturity profile and supports our vision to lead the change towards achieving a circular fashion industry with a net-zero climate impact.”
The bond will be listed on Euronext Dublin with the assistance of BNP Paribas, ING, J.P. Morgan, SEB and UniCredit. ING also acted as an advisor for the sustainable finance framework.
H&M Group previously launched a sustainability-loan loan in 2021, with then-head of investor relations Nils Vinge telling Sourcing Journal at the time that the “sustainability-linked format, compared to traditional green bonds, gives more flexibility to invest where the money makes the most impact in order to meet the ambitious targets we have set out.” The terms of the loan were the same: 500 million euros ($530 million) for eight years. When it made its debut, it was oversubscribed by eight times.
The Cos and Monki owner saw a softening of sales last month with a 10 percent decline in local currencies compared with the year before. The high-street chain, which is reportedly laying off “several hundred” workers at a distribution plant in Germany, blamed discontinued operations in Russia, as well as what it described as “unusually” hot weather in several of its European markets.
Still, its gross profit in the overall third quarter increased by 10 percent to 3.1 million Swedish krona ($2.8 million), with a corresponding gross margin of 50.9 percent. Its operating margin during the same period also rallied by 7.8 percent compared with 1.6 percent in 2022—a sign, CEO Helena Helmersson said, that its focus on profitability and inventory efficiency over sales was working.
“Our efforts to create conditions for profitable growth towards our long-term goals are taking us in the right direction,” Helmersson added. “With a strong customer focus, improved cash flow and increased inventory efficiency our goal of an operating margin of 10 percent during 2024 remains.”
