With our second green bond, we raised 500 million euros – all of which will go straight towards the projects that support our aim of becoming a fully electric carmaker by 2030.
Volvo Cars aims to become a fully electric carmaker by 2030.
Sustainable financing is a powerful tool: it allows investors to play a pivotal role in supporting sustainable development and it gives companies a boost in turning their pioneering plans and ideas into reality.
Today, it became official that we’ll be on the receiving end of such a boost once again, as we successfully placed another green bond. This is our second green bond since we established a Green Finance Framework in 2020, which made it possible for us to issue green bonds and obtaining green loans.
Just like when we issued our first green bond in September 2020, we managed to raise 500 million euros. Just like a regular corporate bond, a green bond is similar to a loan. Investors buy the bond and in exchange for the capital, they’re paid interest at regular intervals. The loan ends when the initial investment is returned.
But the whole point is that the company can’t use the money on whatever they want. Since it’s a green bond, all proceeds are earmarked to finance climate-related or environmental projects.
In our case, it’s our electrification, and by extension, our ambitious climate aims. The money raised through this bond will go straight towards projects that support our aim of becoming a fully electric carmaker by 2030.
Over two thirds of the proceeds will fund the research and development of electric powertrains for next generation pure electric Volvo cars as well as related new platform technology, while the rest will be invested in boosting our production capacity of fully electric cars.
Ever since green bonds first started popping up on the market in the late aughts, their popularity has grown rapidly – and it’s nice to have some concrete evidence of our own that the financial industry still cares about sustainable financing. And of course, it’s also a pretty good indication that a lot of investors out there trust us, our strategy and our way forward.
“Sustainability is central to our purpose and business, and key to our future success,” says Björn Annwall, chief financial officer at Volvo Cars. “The high interest for our green bond is encouraging and a clear sign that the market believes in Volvo Cars and the investment plans we’ve developed to deliver on our climate ambitions. It also reaffirms our commitment to the Paris Climate Agreement and to become a climate neutral company.”
Another thing that is important for us is that our Green Finance Framework is aligned with the ICMA Green Bond Principles. Our framework specifies how projects are identified, selected and managed, providing transparency for investors. We report and give details on how the invested money is used, as well as the environmental and climate effects that it contributes to achieving.
We believe that investment opportunities like these will stay important and relevant, which is why we aim to continue on this track going forward.
“The financial community has a critical role to play in driving sustainable development, and we plan to continue to offer sustainable financing and investment opportunities in the future as we shift towards full electrification,” said Björn Annwall.
The EUR 500m 6-year fixed rate senior unsecured green bond was issued under Volvo Cars’ Euro Medium Term Note programme. The bond matures on 31st May 2028, pays a fixed coupon of 4.25%, equivalent to 291 basis points above mid-swap, and will be listed on the Luxembourg Stock Exchange.