World Environment Day: Why climate finance urgently needs a fresh global consensus
By Claus Aagaard, Chief Financial Officer at Mars
Today is World Environment Day – the United Nations day for encouraging worldwide awareness and action to protect our environment. The message coming from experts and campaign groups today is loud and clear: the situation facing our planet is urgent.
It is clear to me that businesses must stand for more than just maximizing profit and take real action to avoid the worst impacts of climate change. To safeguard the future for coming generations, finance is key to this pursuit: we cannot decouple sustainability from financial performance, rather recognize that the two are mutually reinforcing.
At Mars, we recently completed a $2.5 billion bond offering which included a $500 million sustainability bond. This offering will help us meet our science-based targets to achieve net zero greenhouse gas emissions by 2050 across our full value chain, as well as help finance additional projects that will contribute to a more sustainable future.
The truth is that financial markets have an invaluable role to play in the transformation that’s required to limit the impacts of climate change. Despite what some media might report, we found investors are eager to hear about sustainability efforts as long as the change is real and there is no room for greenwashing. We received a huge reaction to our sustainability bond offer – significantly oversubscribed. Investors expect ambition and impact, and Mars remains committed to both. We hope this response to our bond offering signals that leadership and belief in this area are growing, demonstrating that these are investments worth making.
The recognition that climate and environmental challenges have a direct impact on the delivery of financial returns is gaining ground, but far too slowly and unevenly.
First, we need greater alignment and acknowledgment from all stakeholders – including companies, investors, media, governments – to agree and actually believe that financially incentivized sustainability ambitions and commitments are viable and worthwhile investments – equal to or as important as other options.
This skepticism may in part be because many examples of bonds tied to emissions but with companies being allowed to exclude large chunks of their scope three emissions, disregarding the full value chain, with publications from Bloomberg to Financial Times reporting on a decrease in offerings due to concerns around unambitious targets, immaterial KPIs and small penalties. A Morgan Stanley report at the beginning of 2023 recommended issuers start setting goals that are more ambitious to meet, “otherwise the bond’s impact is de minimis."
Our position at Mars is clear – Net Zero must mean just that; with cuts in absolute emissions across the full value chain and with regular milestones to track progress and nothing left out. As with sustainability bonds, if the flaws aren’t addressed by all, the public perception of ‘greenwashing’ will grow and continue to undermine progress that is so desperately needed.
As CFOs, we have not only the responsibility but also the ability to lead the charge for change and credibility. We need to push for and hold ourselves accountable to a new global consensus for consistency and rigor so that investors remain interested, and so that we all benefit from their results. There’s no denying the world is facing tremendous challenges. Now, it’s time for us as financial leaders to do something about it.
