Deutsche Post SLB: does it deliver?

10 minute read

Deutsche Post, a German logistics company rated A-, issued its first Sustainability-Linked Bond (SLB) on 26 Jun 2023. Group emissions, which include international logistics brand DHL, are driven by transport, predominantly air and road travel. The SLB makes commitments to reduce all emissions to levels verified by the Science Based Targets Initiative (SBTi).

We analyse the structure, assess its ambition level and price the option value of the associated Sustainability Performance Targets (SPT). Overall, there is much to commend this bond from a sustainability perspective. There is limited comparable issuance, so this SLB could establish an encouraging trend in supporting emissions reduction in the transport sector.

We offer the following conclusions:

  • The structure offers strong sustainability targets - material Key Performance Indicators (KPIs) combined with ambitious SPTs. This is encouraging to see in the transport sector, where highly rated issuance has been low.
  • The bond is insufficiently material. A distant observation date means it does not achieve our threshold for a material instrument (a “Greenback SLB”).
  • The ambitious SPTs translate into an option valued at 4.5bp (around 10% of spread). A wide trading level means this bond offers the chance to support an ambitious transition in a high-emitting transport issuer.
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