Published on October 2nd, 2020 | by Joshua Chin0
Volvo’s Green Bond Raises RM 2.4 Billion For EV Future
The Swedish automaker’s zero-emissions EV ambitions now has the money to make it happen.
Volvo has recently announced that it has successfully raised €500 million (RM 2.4 billion) after placing its first green bond in its recently established Green Finance Framework. In normal speak, this means that the Swedish automaker now has the money to proceed with its ambitious climate-neutral goal by 2040.
According to Volvo, the capital has been raised by ‘a diverse group of institutional investors’. Moreover, the automaker touts that the bond issue was oversubscribed by 5 times. A sign that investors currently not only have confidence in Volvo’s zero-emissions plans, but there is a strong market demand for ‘green investment products’. What more is Volvo is not even the first automaker to perform go down this funding path for its EV future, as the Volkswagen Audi Group (VAG) have already done a similar trick to finance its new MEB platform of EVs, among other things.
Proceeds of this green bond has been gazetted to fund the firm’s comprehensive climate plan, not to mention its ambitious electrification strategy for the future. The funds raised here will be used to enable the ‘design, development and manufacturing’ of fully electric Volvos, in addition to allowing the automaker to address its carbon emissions in the supply chain. Thus being in line with the aforementioned Green Finance Framework.
The first step in Volvo’s ambitious EV future will be the reduction of the lifecycle carbon footprint of each car by a staggering 40% between 2018 and 2025. This ambitious figure includes the reduction of tailpipe emissions per car by 50%, and also the reduction of operational and supply chain carbon emissions per car by 25% each respectively.
What this means for car buyers is that Volvos of the future will be even more green than they are now. Judging by the cars they produce nowadays already, the green Volvo EV future is definitely a future to anticipate.
PRESS RELEASE: Volvo Cars today successfully placed its first green bond, raising EUR 500m from a diverse group of institutional investors and further increasing the company’s financial flexibility.
The proceeds of the bond will be used to fund the design, development and manufacturing of fully electric cars in line with the company’s recently established Green Finance Framework. A report will be issued annually to provide full transparency to investors.
The bond issue was oversubscribed 5 times, illustrating both the current market demand for green investment products and the financial community’s strong confidence in Volvo Cars’ strategy.
“I am very pleased that we successfully placed our first green bond,” said Carla de Geyseleer, Chief Financial Officer. “The financial community has a critical role to play in supporting sustainable development, including the transition to a low carbon economy. In this respect, it’s very encouraging to see so much investor interest in helping us electrify our fleet and deliver on our climate ambitions.”
Volvo Cars’ Green Finance Framework was reviewed by Cicero, a leading provider of independent, research-based evaluations of green bond investment frameworks, and received its highest possible rating, Dark Green.
Last year, Volvo Cars launched a comprehensive climate plan which addresses carbon emissions across all its operations and products, as it strives to become climate-neutral by 2040.
The plan goes beyond addressing tailpipe emissions through electrification; the company will also tackle carbon emissions in its manufacturing network and wider operations, its supply chain and through recycling and reuse of materials.
As a first tangible step towards its 2040 vision the company aims to reduce its lifecycle carbon footprint per car by 40 per cent between 2018 and 2025.
This includes a 50 per cent reduction in tailpipe emissions per car, a 25 per cent reduction per car in operational carbon emissions, including from manufacturing and logistics, and a 25 per cent reduction per car in supply chain carbon emissions.
The EUR 500m bond was issued under Volvo Cars’ Euro Medium Term Note programme. The bond matures in October 2027 and pays a fixed coupon of 2.5 per cent. The settlement date is expected to be 7 October 2020 and the bonds will be listed on the Luxembourg Stock Exchange. The bookrunners for the transactions were BNP, SEB and ING.