ICA Gruppen green bond: deforestation risk

6 minute read

Swedish food retail chain ICA Gruppen is in the market for an inaugural green bond. The company scores relatively low on the biodiversity and deforestation ranking of its supply chain. The use-of-proceeds of the proposed green bond relating to "eco-efficient and/or circular economy adapted products" raise several questions for investors:

  • Why has the issuer not considered more ambitious or precise targets to ensure that the bond ranks higher than the current "light green"?
  • How do the targets/KPIs relate to requirements set by the recently enacted EU Deforestation Regulation?
  • The low rankings of the issuer from many of the leading providers in the biodiversity space make it hard to invest in the name from a quantitative portfolio allocation angle. Will there be remedies to this, and what will those be?

A successful and highly profitable food retailer in Scandinavia is in a strong position to have a market-leading green bond framework with ambitious use-of-proceeds in terms of biodiversity/food supply chain impact. In its current state, we ask investors to consider if the ICASS proposal gets there.

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