Client stories

Henkel re-enters Market with Sustainability - Linked Bond

Pioneers at heart for the good of generations

Henkel operates globally with a well-balanced and diversified portfolio. The company holds leading positions with its three business units in both industrial and consumer businesses thanks to strong brands, innovations, and technologies. Henkel Adhesive Technologies is the global leader in the adhesives market. In its Laundry & Home Care and Beauty Care businesses, Henkel holds leading positions in many markets and categories around the world. 

Recognising the impact Henkel can have by developing sustainable innovations, which are used millions of times around the world every day, the company has integrated environmental and social criteria into its innovation process so that every new product or formulation contributes to sustainability. 

Alongside this focus on innovation, Henkel has set out a comprehensive sustainability strategy, that includes all areas of the company. Its objectives are also reflected in the company’s Sustainable Finance Framework, published in October 2021. The framework, which covers Green Use of Proceed bonds and Sustainability-Linked bonds (SLBs) and is aligned to the International Capital Market Association (ICMA) Sustainability‐Linked Bond Principles 2020 and the Green Bond Principles 2021, includes three environmental Key Performance Indicators (KPIs), two of which are utilised in this SLB issuance: 

  • KPI 1) Reduce Scope 1 and 2 greenhouse gas (GHG) emissions 54% per ton of product by 2025 
  • KPI 3) Increase the percentage of recycled plastics in all plastic packaging of consumer products to 30% by 2025. 

KPI 2) relates to Scope 3 emissions by 2030 and is thus tailored to longer-dated issuances. The company issued its first Green Bond, a ‘Plastic Waste Reduction’ Use of Proceeds bond in 2020, followed by two issuances under the new Framework for a 5-year USD and an 11-year EUR Sustainability-Linked Bond in November 2021.

Henkel’s ambitious sustainability KPIs attract investors

Looking to re-enter the EUR market with another Sustainability-Linked Bond, Henkel asked NatWest to support the issuance in the role of Active Bookrunner.

Despite a more difficult market environment caused by the announcement of a complete halt of gas deliveries via Nordstream 1, Henkel’s SLB, which launched as a ‘EUR 500 million expected’ transaction, garnered investor interest right from the start. A strong and well-diversified orderbook of over €3.2 billion allowed the issuer to tighten the price twice while maximising the issuance size, opting for €650 million.

The 5-year SLB includes the 2025 targets of the Sustainable Finance framework’s KPI 1, and KPI 3. The targets will be measured in 2025 with potential coupon step-up for the final year for missed targets of 37.5 bps per target (up to 75 bps). 

Investor demand was driven by asset managers and bank treasuries, taking 65% and 14% respectively of the allocation, while some relatively rare, large orders also came from corporate treasuries. Almost half of the order book was allocated to investors with a ‘strong ESG commitment’ (source: NatWest Markets’ ESG investor scoring tool). A number of investors explicitly commented that the SLB label and the bond’s KPIs were a driving factor for them to participate in the transaction. This is one of many new entrants in to the SLB market, which now represents ~16% of total outstanding ESG labelled debt in EUR terms.

Facilitating environmental, social, and economic progress

Ulrich Borgstädt, Head of Group Treasury, Henkel, commented: “We are very pleased with our successful return to the EUR market with another issuance in SLB format, and we are grateful for the investors’ support we continue to receive on our sustainability journey. We appreciate the NatWest team’s excellent insights into sustainability topics and for facilitating a fruitful dialogue with investors.”

Daniel Bressler, Corporate Climate & ESG Capital Markets, NatWest, said: “We’re delighted to have had the opportunity to support Henkel with their SLB issuance. This bond offers a rarity value for investors, underlined by Henkel’s strong credit, business and sustainability profile.

Philippe Bradshaw, Head of European Syndicate, NatWest, stated: “The transaction showed that we see a functioning market despite challenging market conditions, and we are very pleased of having supported our customer, Henkel, with this capital markets transaction.”

Marco Sterly, Capital Markets, NatWest, concluded: “The strong investor support for this transaction underlines Henkel’s strong recognition with fixed income investors. At NatWest, we’re excited that we can actively contribute to social, economic and environmental progress in Europe and the UK by supporting meaningful and market-leading issuances such as Henkel’s Sustainability-linked Bond.”

Disclaimer

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes. It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

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