Sustainability-Linked Bonds

L’Oréal misses SLB targets

Written by Prahalad Prasad & Josephine Richardson

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On 18 March, consumer goods company L'Oréal announced that it had missed two of the three Sustainability Performance Targets (SPTs) linked to its sole Sustainability-Linked Bond (SLB), which is maturing in June 2026. This will result in a 0.25% additional premium payment at maturity, equivalent to 93bps in running yield.

The two missed targets both relate to greenhouse gas emissions: SPT1 required absolute zero Scope 1 + 2 emissions across all operated sites, while SPT2 required a 14% reduction in ‘cradle-to-shelf’ Scope 1, 2, + 3 emissions intensity relative to a 2021 baseline. L'Oréal’s third target — ensuring 50% of plastics used in packaging derive from recycled or biobased sources — was narrowly achieved at 50.14%.

Our analysis examines the drivers behind each target outcome. For SPT1, although L’Oréal has achieved 100% renewable energy across its sites, fugitive refrigerant gas emissions exceeded the strict 130 tCO₂e threshold specified in the bond prospectus. For SPT2, the company disclosed two emissions intensity figures based on different baselines, neither of which reaches the 14% reduction required; the company attributes the shortfall to product mix changes and insufficiently rapid decarbonisation by suppliers.

On market pricing, our analysis suggests the premium payment has not yet been fully reflected in the bond’s yield, with the instrument continuing to trade broadly in line with its peer universe.

About the authors

Prahalad Prasad

Prahalad Prasad

Associate Director, Research

Based in London, Praha covers topics including but not limited to the just transition, sustainability-linked bonds and deforestation. He previously spent seven years in Lloyds Bank’s Debt Capital Markets team.

Josephine Richardson

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

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