Cargill: EUR bond, EU deforestation risk

4 minute read

American food corporation Cargill (CARGIL) entered the market for a potential euro bond issuance, the first since 2014, with its last outstanding bond having matured in Feb 23. The company has clear deforestation and land-use change exposures, with criticism being levelled against its links to soy, palm oil and cocoa.

This would be one of the first bonds with such high exposure to enter the euro bond space since the introduction of the EU deforestation legislation announced late in 2022.

Potential investors in the CARGIL bond issuance need to consider the risk that at some point before 2030 (the expected maturity date for the bond), EU regulation will oblige the company to provide supply chain data and non-deforestation proofs along the lines of the new legislation.

The relatively sparse information on deforestation in the deal roadshow presentation leaves questions around whether the company’s policies will be aligned with the EU requirements, in the likely scenario that the bond comes into scope.

We suggest an enhanced due diligence process for investors with biodiversity and deforestation investment guidelines.

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