(Bloomberg) —
Dow Inc., a maker of plastics for packaging, has tapped the green-bond market for the first time to borrow $1.25 billion as it looks to reduce its carbon emissions and plastic waste.
It sold the bonds in two parts through its Dow Chemical Co. subsidiary, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, yields 1.3 percentage point above Treasuries, after initial talks in the area of 1.6 percentage point, said the person, who asked not to be identified as the details are private.
Bank of America Corp., Citigroup Inc., HSBC Holdings Plc., ING Groep and SMBC Nikko Securities America Inc. are managing the bond sale, the person said.
Proceeds from such offerings will be used to finance or refinance a range of eligible projects, including energy efficiency, renewable energy, decarbonization and initiatives aimed at ending plastic pollution, according to its green financing framework. The projects also include the world’s first net zero ethylene cracker in Fort Saskatchewan, Alberta, Dow representative Rachelle Schikorra said in emailed statement.
“Our industry’s path to net zero involves significant capex investments and a wide set of technologies,” said Schikorra. “Green financing allows our investors to participate in the implementation of Dow’s sustainability strategy, focused on decarbonizing and building a circular economy.”
Chemical companies are under pressure to address plastic waste that clogs oceans, damaging wildlife and ecosystems around the world. Dow aims to be carbon neutral by 2050, and plans to invest approximately $1 billion annually to drive both growth and decarbonization of its manufacturing assets, according to the framework.
It’s the latest company to seize on favorable borrowing costs to sell bonds earmarked for green and social projects. Global sustainable bond sales reached a record $150 billion in January and top underwriters of the debt are also expecting February to be busy.
Read more: Global ESG Bond Sales Reach $150 Billion in Busiest January Ever
Dow’s new facility in Alberta is expected to boost the company’s production of ethylene — the key building block of everyday plastics — with the goal of eventually reducing net emissions to zero by 2030. Jim Fitterling, chair and chief executive officer at Dow, said in a statement last month that construction will begin this year.
The company has a tangible, profitable path to its low-carbon goals, and projects like the zero-carbon retrofit of its Alberta site show large opportunities to meaningfully deploy green capital, according to Bloomberg Intelligence analyst Jason Miner.
“Responding to pressure over plastics waste, Dow is funding a wide range of recycling and bio-based technologies across the globe,” said Miner. “Yet waste collection remains a significant challenge.”
(Updates with pricing details in the first and second paragraphs.)
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