Automaker Ford Motor Company raised $2.5 billion in an unsecured green bond offering, more than doubling its original goal of selling at least $1 billion in green bonds announced earlier this month.
The bond proceeds will go toward environmentally friendly projects including clean transportation, and the manufacture of its battery electric vehicles as the Dearborn, Mich.-based firm is transitioning to clean energy, according to Bloomberg.
The offering is part of a larger sustainability financing framework that Ford embarked on in early November to provide investments for the development of EVs, clean manufacturing, and community projects.
In addition, the company expects to be able to have cheaper access to capital and reduce its high-cost debt. To that effect, it announced a buyback of $5 billion in junk bonds that carry high-interest rates. It also plans to regain its investment-grade credit ratings for its debt. This will help the company further strengthen its balance sheet and provide financial flexibility.
“Winning businesses are financially healthy and lead in sustainability – it’s not a choice, they rely on each other,” said John Lawler, Ford’s CFO. “We’re again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford.”
Ford’s sustainable financing framework is intended to help the company reach its carbon net-zero goals by 2050, as outlined in its commitment to the Paris Agreement.
The $5 billion in junk bonds that the company is retiring via cash tenders carry interest rates of 6.63% to 9.98%. The $2.5 billion green bond issue carries yields of just 3.25% and matures in 10 years, per Bloomberg.
“This lowers the cost of our debt substantially,” said Lawler in a recent interview, when the company disclosed its repurchase plans. “It provides us additional financial flexibility, not only from the standpoint of lower interest expense but also it’s strengthening the balance sheet, which is good as we work to return to investment grade.”
Proceeds from each sustainable financing issue will be fully allocated within 24 months in four main areas.
Clean transportation will include the design, development, and manufacture of zero-emissions transportation, with a focus on EVs and their batteries.
Clean manufacturing will further slash the environmental footprint of Ford’s operations by using renewable energy, sustainable water, wastewater, and waste management, as well as building energy-efficient buildings.
In addition, Ford also plans to advance economic opportunity in underrepresented populations. It will create opportunities for minorities, women, veterans, and disabled people to own and run businesses, community ventures, and social organizations that promote better health, education, and disability services.
The fourth pillar is to lift disadvantaged communities by renovating spaces for employment and expanding access to essential services.
“We’re going to build high-quality electric vehicles at scale and do so in a way that has a positive impact on people and the environment,” said Bob Holycross, Ford’s vice president of sustainability, environment, and safety engineering. “In communities where air pollution and climate change are disproportionate burdens today, access to EVs can have the additional benefit of moving people to the front of the line for the health, economic and mobility benefits these vehicles can provide.”
