Apple is first U.S. tech company to issue green bonds
Apple frequently uses debt rather than its flush cash coffers to finance corporate initiatives, such as stock repurchase programs — it makes sense to do so for tax reasons.
But, the company’s latest appeal to the public debt markets includes another “first” for Apple and the tech industry at large: Apple is issuing $1.5 billion in green bonds to pay for a wide range of environmental initiatives. The issue is the largest ever to be undertaken by a U.S. company.
Broadly speaking, green bonds are specifically designated for projects that mitigate the effects of climate change. That rather vague description could cover anything from green building projects to renewable energy investments.
Goldman Sachs & Co., Bank of America Merrill Lynch, Deutsche Bank Securities and J.P. Morgan are managing Apple’s offering. The company also hired consulting firm Sustainalytics to provide an independent review of its green bond plans, now and on an ongoing basis.
Some forecasts suggest that there could be up to $1 trillion in green bonds issued annually by 2020. The Climate Bonds Initiative, which offers a certification mechanism that acts as an audit of how money is used, reports that close to $42 billion in green bonds were sold last year. That was an annual record, although the organization was hoping to reach the $100 billion mark.
“Growing investor demand, particularly by institutional investors and corporate treasuries, continues to result in over subscriptions as well as pledges to invest billions more capital into green bonds,” Climate Bonds reported in its update.
According to the prospectus filed in mid-February by Apple with the Securities and Exchange Commission, the company has earmarked its green bond issue for the following:
- Investments in renewable energy sources, including solar and wind projects and associated energy storage technologies
- Energy efficiency projects and upgrades across its facilities, products and supply chain; it will prioritize projects that help Apple earn additional LEED Gold or Platinum certification, or recognition under the BREEAM sustainable buildings program
- Water efficiency projects, such as irrigation improvements or low-consumption fixtures, as well as investments in systems for use recycled water
- Research and development into “greener materials,” including those that are bio-based; the use of recyclable materials is also a focus
- Projects focused on recycling and materials recovery
"Following the historic climate agreement in Paris last month, it's more important than ever that corporations like Apple take strong action to protect our planet," Apple said in documents supporting its securities filing. "WIth everything we do, we want to show what's possible and pave the way for others to follow."
Some of the projects that could be supported by the bonds already have been announced. For example, Apple is seeking high-level green building certifications for its data centers in Denmark and Ireland, and it is implementing energy-efficiency measures across its retail stores. Another initiative that could benefit: Apple's solar energy projects in China. Indeed, Apple has said that its priority for the green bond proceeds will be new projects.
Here’s the money quote from the firm’s written comments about the offering: “Overall, Sustainalytics is of the opinion that Apple’s project eligibility criteria are credible and robust, and that by selecting projects base on these criteria, Apple is effectively targeting its green bond proceeds at projects that will contribute to reducing Apple’s overall environmental impact.”
Most of the proceeds raised by the green bonds will be spent within two years of the issue date, according to the various documents about the offering.
Apple has committed to reporting about the allocations on an annual basis, as part of a separate report that will be published on investor relation site. It also has hired Sustainalytics to conduct independent, annual updates about its progress.
Apple's commitment to environmental initiatives has become much more transparent since the company hired former Environmental Protection Agency chief Lisa Jackson three years ago.