In April 2021, FedEx Corp., parent of the world’s largest express transportation company, launched its first sustainable bond, a €600m, 8-year maturity that was part of a $3.25bn multi-tranche issuance, including two in US dollars and two in euros. BNP Paribas was a joint bookrunner in the inaugural euro-denominated sustainable bond.
The proceeds will finance a range of decarbonisation and energy efficiency projects in transportation, research into carbon sequestration as well as socioeconomic advancement and empowerment, as part of the US company’s ambitious ESG commitments.
“In Europe, these bonds attract both traditional and ESG investors looking for higher returns but also for impact, as they are able to know precisely how the proceeds will be used,” noted Anne van Riel, Head of Sustainable Finance Capital Markets at BNP Paribas Americas.
Amongst FedEx’s eligible use of proceeds, as published in its Sustainability Bond Framework, are projects in clean transportation, with the rollout of electric and other zero emission-powered vehicles for its commercial fleet, with associated charging or fuelling infrastructure; and the increased use of biofuels in aviation, to name a few. The scale of the transition is massive – with a fleet of more than 200,000 motorised vehicles and 680 aircraft delivering 18 million shipments daily, FedEx connects 99% of global GDP.
In Europe, these bonds attract both traditional and ESG investors looking for higher returns but also for impact, as they are able to know precisely how the proceeds will be used.Anne van Riel, Head of Sustainable Finance Capital Markets, BNP Paribas Americas
Other projects include green buildings and energy efficiency initiatives to reduce energy consumption at FedEx sites and promote generation through renewables with on-site photovoltaic (PV) solar systems. There are also eco-efficient and circular economy projects, with investments in solutions to reduce waste in packaging or increase material re-usability.
Of particular note, FedEx is also looking at improving the social impact of its supply chains by increasing the diversity of its suppliers.
Decarbonising transportation through sustainable finance
The recent bond issuance fits in with the ambitious plans FedEx unveiled in March this year to achieve carbon-neutral operations globally by 2040 – a decade earlier than the goals of the Paris Agreement.
The company pledged at the time to make investments worth over $2 billion in three key segments: vehicle electrification, sustainable energy and carbon sequestration. To that effect, FedEx committed $100 million to Yale University to help establish the Yale Center for Natural Carbon Capture, which will support applied research into natural CO2 capture solutions.
Momentum grows in sustainable mobility
FedEx is joining a growing number of large players in the mobility sector that are using sustainable finance as an efficient tool to reach their net zero targets. Recent examples include JetBlue, which became the first-ever airline to deploy a sustainability-linked loan (SLL), and Daimler and Volvo’s first green bonds.
Cars, trucks, planes and ships need to be powered as soon as possible by sustainable sources of energy such as renewables or hydrogen. This transformation will also require large investments to create adequate charging infrastructure.Hervé Duteil, Chief Sustainability Officer, BNP Paribas Americas
Today transportation is responsible for 24% of direct CO2 emissions from fuel combustion, according to the International Energy Agency (IEA). To address climate change, the sector is undertaking significant efforts to reduce its greenhouse gas emissions, says Hervé Duteil, Chief Sustainability Officer at BNP Paribas Americas.
“These efforts will have to apply to the entire transportation ecosystem,” says Duteil. “Cars, trucks, planes and ships need to be powered as soon as possible by sustainable sources of energy such as renewables or hydrogen. This transformation will also require large investments to create adequate charging infrastructure.”
Private initiatives and public sector funding are not sufficient to meet the huge amount of capital needed to address the increasing demand for sustainable mobility solutions, he notes. Sustainable finance can help fill this gap, with tailored strategies and instruments that contribute to a more balanced development.
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