Hapag-Lloyd’s “green” bond is linked to sustainability target for first time

Sustainability-linked bonds are a young, innovative instrument for green financing. However, unlike with traditional green bonds, the intended use of these new types of bonds is not tied to a specific sustainability-related project. Instead, the proceeds can be freely used in any way. And, at Hapag-Lloyd, they will be used for the early redemption of an existing bond.

Goal: 60 percent less CO2 intensity

Hapag-Lloyd’s new bond, placed in late March 2021, is linked to a clearly defined sustainability target: By 2030, the CO2 intensity of Hapag-Lloyd’s own fleet is to be reduced by 60 percent compared with the reference year 2008. This new sustainability target will be an important building block of Hapag-Lloyd’s expanded sustainability strategy, which will be published later this year.

Hapag-Lloyd’s progress in lowering its CO2 intensity will be measured and annually disclosed according to the so-called Average Efficiency Ratio (AER) indicator, which is measured in terms of grams of CO2 per tonne-mile. For Hapag-Lloyd, this figure was 11.68 in 2008, and it is to be lowered to 4.67 by 2030. Hapag-Lloyd aims to achieve this ambitious goal by purchasing new and efficient ships, phasing out old ships, using alternative fuels and introducing additional measures to reduce emissions.

As early as 2025, an audit will be carried out to determine whether Hapag-Lloyd has achieved its intermediate target on the way to a 60 percent reduction in CO2 intensity in the previous year. If the shipping company succeeds in achieving this goal, the bond will continue to have a coupon of 2.5 percent. However, if Hapag-Lloyd misses the intermediate target, the coupon will rise by 25 basis points for the remaining maturity of the bond – i.e. until 2028.

“With the successful placement of our sustainability-linked note, we have reached another milestone in our green financing activities. At the same time, we are very pleased with the demand and the confidence of our investors. Now we need to keep our own ambitious sustainability targets for CO2 intensity firmly in sight and gradually achieve step-by-step,” says Mark Frese, Chief Financial Officer of Hapag-Lloyd AG.