Huge investor demand for Anglian Water’s inaugural net zero-based sustainability linked bond
24 June 2021
The Anglian Water Group has once again made financial history, becoming the first water company in the world to launch a sustainability-linked bond connected directly to achieving its newly set interim carbon targets by 2025. The order book for the seven-year, £300 million bond, launched yesterday, was significantly oversubscribed with orders peaking at £1.6 billion.
The company has committed to reduce net operational carbon by 30 per cent from 2018/19 levels by 2025, and capital carbon by 65 per cent from a 2010 baseline by the same date. These new targets mark transitional points on the journey towards Anglian Water’s 2030 targets of net zero operational carbon and a reduction of 70 per cent in its capital carbon emissions from the same baselines.
These are the most stretching targets yet from any water company in the UK, with the industry already making its mark as the first sector worldwide to work collaboratively on a routemap to reach net zero within the decade. Building on the company’s strong track record of utilising green finance and following the launch of its new sustainability finance framework last week, yesterday’s bond launch from Anglian was the first of a series of planned net zero bonds aligned directly with achieving these tougher targets.
Anglian is the first utility company in the world to link its carbon targets specifically to a bond to allow it to raise funds at a more competitive rate. The coupon was set at 2 per cent, the lowest coupon for a debt instrument of this type.
Operating in one of the driest, yet fastest-growing parts of the UK means long-term access to secure water supplies is one of the most pressing challenges Anglian faces. The £300 million proceeds from the seven-year, 2 per cent bond will be ploughed, ultimately, into capital investment schemes that will ensure future resilience for the east of England in the face of climate change and a rapidly growing population.
CEO for Anglian Water, Peter Simpson, said:
“The launch of this bond, the first of its type for any utility in the world, further amplifies our commitment to the environment and the reduction of our carbon footprint. Linking it directly to delivering on our tough carbon targets demonstrates how determined we are as a responsible business to invest in resilience for our region in the most sustainable way – and highlights our willingness to be held to account on our progress.
“The £300 million raised will go towards addressing the three-fold challenges of water scarcity, climate change and environmental protection in the face of a growing population, with the carbon-linked funding instrument that generated it representing the pinnacle in responsible financing.”
The bond launch exemplifies Anglian Water’s purpose-led approach to doing business, and follows last week’s announcement of a new, streamlined financial structure for Anglian Water Services Limited. The new structure is designed to enable further reduction in the gearing of the company in order to maintain its solid investment grade credit ratings in the interest of customers and investors, the environment, and the long-term viability of the business.
Peter continued: “The opportunities opened up by the growing field of green finance are a perfect fit for us, given our track record of bold action on climate change. Our strong and resilient structure and well-evidenced commitment to operating sustainably allows us to borrow at the most competitive rates to finance investments for the long-term benefit of our customers and our region.”