Starbucks issues $1 billion sustainability bond to fund ethical coffee supply chain

Starbucks recently announced that it has completed issuance of its third and largest sustainability bond to date, which will be used to support ethical coffee sourcing and the company's Greener Retail initiative.

The new $1 billion sustainability bond follows the company's $500 million U.S. sustainability bond issued in 2016, and the yen-denominated sustainability bond it issued in the Japanese market in 2017.
As with the two previously issued sustainability bonds, the recently raised funds will support Starbucks' ongoing work to ensure its supply chain is built on ethically sourced coffee.

$1 billion to support coffee farmers and a greener retail chain

The sustainability bond's funding purposes include purchasing coffee verified by Coffee and Farmer Equity Practices, continued development and operation of Farmer Support Centers and agronomy R&D centers in various coffee-growing regions and new and refinanced loans to coffee farmers made through Starbucks' $50 million Global Farmer Fund.

A portion of the funds will also go towards a $20 million equity investment in responsAbility Investments AG, which will become a new partner of the Starbucks Global Farmer Fund. Loans will be offered to farmers in Latin America, Africa and Asia, to help them pay for newer and more productive trees, new equipment and any other materials or actions needed to enhance their coffee crops' quality and productivity.

Starbucks is using the $1 billion to assist coffee farmers and improve the company's overall sustainability.

The bond will also be used to help fund Starbucks' Greener Retail commitments, including the previously announced Greener Stores initiative to design, build and operate 10,000 Greener Stores globally by 2025. These Greener Stores will be constructed with an emphasis on energy efficiency, renewable energy, water stewardship, waste reduction and other key sustainability goals that

Starbucks developed in partnership with the World Wildlife Fund.
Finally, portions of the $1 billion sustainability bond will be put towards investments in greener cups and packaging, including the global rollout of strawless lids and the creation of new recyclable and compostable cups.

'Oversubscribed' sustainability bond breaks new ground

In addition to positioning itself as an industry leader in supply chain sustainability, this third bond also marks Starbucks as something of a pioneer in the use of sustainability bonds.
Sustainability bonds are still fairly new and practically unheard of in the restaurant industry, and the International Capital Market Association database presently lists Starbucks as the only restaurant brand to issue one, let alone three to date. Clearly, the unique offering has proven to be a hit with investors, though.

"We are very pleased to see that our new sustainability bond attracted significant investor interest and was oversubscribed," said Starbucks CFO Patrick Grismer. "The bond demonstrates Starbucks' commitment to meaningful, continual progress toward our aspiration of sustainable coffee, served sustainably. It also illustrates a trend toward heavier interest from investors in our socially and environmentally focused projects - in this case supporting coffee farmers and leading in green retail."
Starbucks also seems to be reassuring investors by providing a high degree of accountability. The sustainability bond requires the company to report on how the funds are spent and what impact they have, and also publish annual updates on its public-facing website.