Schneider Electric, a French multinational providing energy and digital solutions for efficiency and sustainability, has launched the first ever sustainability-linked convertible bonds. The zero-coupon bonds, issued for a nominal amount of approximately €650 million, are convertible into new or existing shares and are due in 2026.
BNP Paribas is sole Structuring Advisor and sole Global Coordinator for the first ever convertible bond linked to sustainability objectives.
Sustainability-linked bonds (SLBs) are bond instruments that embed environmental, social and governance (ESG)-related indicators that issuers commit to achieve. If they fall short, bondholders receive additional payments. Several SLBs have already been issued (by companies like Enel and LafargeHolcim), but this is the first sustainability-linked convertible bond (SLCB).
For this transaction, Schneider Electric has chosen three indicators (KPIs) with associated objectives and methodology, which will be tracked, reported and verified by EY & Associés:
- Deliver 800 megatons of saved and avoided CO2 emission for customers by 2025
- Increase gender diversity: 50% of hires to be women, 40% women among front-line managers, 30% women in leadership teams by 2025
- Train 1 million underprivileged people in energy management by 2025
If the company fails to achieve a minimum sustainability performance measured by a combination of these KPIs, it must make a premium payment. The performance of the KPIs is reported annually and reviewed by a third party (EY & Associés).
Schneider Electric has made strong commitments for its entire ecosystem, ranging from helping its suppliers improve their sustainability practices to reducing customers' emissions through innovative solutions. It also has an ambitious action plan for its own operational scope, to achieve net-zero operational emissions and reduce scope 3 emissions by 35% by 2030 (vs 2017) as part of its validated 1.5°C target.
Unlike green or sustainable bonds, the funds raised with sustainability-linked instruments do not target a specific use of proceeds, and are used for general corporate purposes.
BNP Paribas was sole Global Coordinator and sole Structuring Advisor, and advised Schneider Electric on its Sustainability-Linked Financing Framework.
Schneider Electric's Framework is in line with the International Capital Market Association's Sustainability-Linked Bond Principles, and has been reviewed by Vigeo Eiris.
Schneider Electric CFO Hilary Maxson commented: "We are happy to announce our first sustainability linked convertible bond. This bond demonstrates the focus and commitment of the Group to ESG across its operations, business and culture and as a catalyst for its future growth."
Andreas Bernstorff, Head of Equity Capital Markets at BNP Paribas, said: "As this is the first sustainability-linked convertible bond globally, there was overwhelming demand. We look forward to applying our structuring and distribution capacity to help further issuers tap into this investor appetite."