H&M: 7-Times Oversubscribed Sustainability-Linked Bond Draws US$4.6 Billion In Orders

H&M Group’s newly issued €500 million (US$606 million) sustainability-linked bond (SLB) garnered huge interest on the market. The bond was 7.6-times oversubscribed, attracting more than US$4.6 billion orders in a strong sign of the greener investment sentiment taking over the financial industry.

Financial Bond Issuance and Investor Interest

H&M has issued a €500 million (US$606 million) SLB with a maturity of 8.5 years, which drew in a whopping US$4.6 billion orders, the company announced on Thursday (February 18). The debut was so strong with investors oversubscribing by 7.6-times, allowing H&M to cut the interest yield rate offered by half between initial price talk and final terms.

By contrast to green bonds, SLBs are tied to companies meeting their defined sustainability targets. In H&M’s case, the bond, listed on the regulated market Euronext Dublin, will require the fashion giant to use more recycled materials and slash greenhouse gas emissions – or risk paying more interest if these targets are not met. As Adam Karlsson, CFO, H&M Group, commented: “This type of bond creates a clear and transparent commitment and incentive for the company.”

Sustainability Performance Targets (SPTs) for 2025

The specific goals that the Swedish fast fashion giant outlined to be met by 2025 include the following requirements:

• Recycled Materials: Ramping up the use of recycled materials to 30%.
• Operational Emissions: Reducing emissions from its operations by 20%.
• Supply Chain Impact: Reducing absolute Scope 3 emissions across its supply chain by 10%.
• Maturity and Scale: A maturity of 8.5 years with 7.6-times oversubscription.

Market Valuation and Expert Opinions

“Today’s successful bond issue is proof that the financial market also values our ambitious sustainability work,” said Helena Helmersson, CEO of H&M Group. This reflects a strong sign of confidence in green, sustainable or ESG-forward investing, especially as such approaches have proven to gain an edge over traditional investments.

Lars Mac Key, head of sustainable bonds at Danske Bank, described it as a “blowout deal” that “opens the door for issuers to come to the market and meet the sustainability-focused investor community.” Furthermore, Evan Bruner, project manager of independent ESG rating firm Sustainalytics, stated: “Sustainalytics is of the opinion that the H&M Group Sustainability-Linked Bond KPIs are relevant and material to the issuer and that the SPTs are ambitious and impactful.”

Industry-Wide Transformation

Helena Lindahl, portfolio manager at Storebrand Asset Management, noted that “if more retailers followed this route there will be a completely new industry for recycling clothes on a scale that is pretty far from where we are now.” In an attempt to shed its reputation as a fast fashion behemoth, the firm is now taking action on almost every front – from partnering with innovative recycling tech startups to incorporating circular fashion services and even setting up a dedicated green B2B platform to drive industry-wide change.