Sustainable Finance

Arcos Dorados Announces its Initial Sustainability-linked Bond

Published on: 6 May 2022 03:36 PM
by KnowESG

Arcos Dorados Holdings, Latin America's largest restaurant chain and the world's largest independent McDonald's franchisee, recently announced the issuance of its first Sustainability-Linked Bond (SLB), making it the first in the Latin American restaurant industry to link financial goals to environmental goals.

SLBs are debt instruments in which the issuer agrees to satisfy particular ESG (Environmental, Social, and Governance) criteria, assessed by key performance indicators (KPIs), in exchange for lower interest rates. 

Arcos Dorados chose to minimise greenhouse gas (GHG) emissions across its entire operation, marking yet another milestone in the company's ongoing and expanding commitment to environmental protection and community development in the region.

The agreement's aim is consistent with the Company's prior pledge to cut GHG emissions from its restaurants and offices by 36% and its supply chain by 31% by 2030, using 2021 as a baseline.

Marcelo Rabach, Chief Executive Officer, said:

"Sustainability is part of Arcos Dorados’ culture as well as our business strategy. As leaders in the private sector, we continually seek to balance our business activities with our socio-environmental impact. The issuance of this bond is an ambitious step that demonstrates our conviction that sustainability is not only the right thing to do, but it can also support a good financial strategy."

Excess GHG emissions, particularly carbon dioxide, lead to global warming, which poses a significant threat to the planet's ecology. 

One of the focuses of the company's ESG platform, known as its "Recipe for the Future," which is connected with the United Nations' Sustainable Development Goals (SDGs), is to drive a low-carbon economy.

In this context, Arcos Dorados began measuring and auditing the "carbon footprint" associated with its operations in 2019, which accounts for about 5.7 per cent of its total GHG emissions. Since 2021, the company has been tracking its suppliers' carbon footprints, which account for more than 93 per cent of its total GHG emissions. In other words, the company's KPIs for this financial instrument account for nearly all of its GHG emissions.

Gabriel Serber, Vice President of Social Commitment and Sustainable Development, said:

"We believe we have a responsibility to be an agent of positive change given our size and scale. Our commitment to reducing GHG emissions goes beyond our operations, which is why we went a step further with this bond issuance and involved our main suppliers with this commitment, thus generating a joint effort to reduce the carbon footprint of our entire operation in Latin America and the Caribbean."

Annual audits of the Company's KPIs will be done by third parties in conjunction with the issue of the Sustainability Linked Bond. In addition, Sustainalytics, a prominent worldwide sustainability rating business, has endorsed the financial instrument as part of this transaction and under the Sustainability-Linked Bond Principles (SLBP).

Arcos Dorados continues to progress and reinforce its environmental commitments through its Recipe for the Future, with increasingly ambitious and challenging targets, including all elements of its operations.

Source: yahoo!finance

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