Relative value is in the eye of the Ahold-er

11 minute read

Koninklijke Ahold Delhaize N.V. (Ahold) has something for everyone with its latest debt issuance – a three-part deal comprising vanilla, green, and Sustainability-Linked Bond (SLB) instruments. The unique offering allows investors to choose the debt that best supports their own climate objectives. It may also shed light on how pricing differs across different sustainable investment products.

Ahold, a Belgian-Dutch supermarket chain, has an emissions footprint dominated by its purchased goods and services, some of which have links to Brazilian deforestation.

Ahold has green and sustainability debt outstanding, using Use-of-Proceed instruments for eligible sustainable investment. The recent green bond focuses investment on Scope 1 and 2 emission reductions, which are directly within Ahold’s operational control.

Its SLB (which used an enhanced sustainability framework to its earlier issuance), has four targets, two of which are linked to Scope 3 emissions. Comparing to peer SLBs, the targets are the most comprehensive, although SBTi verification of the targets is outstanding.

However, market pricing suggests that the potential option value of this new SLB is not fully appreciated at present. Nor did investors immediately react to how the higher ambition of this instrument changed the dynamics of Ahold’s previously issued SLB, which references less challenging sustainability targets.

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