L’Oréal SLB may be pricing a target miss

7 minute read

Download full paper (0.4mb)

L’Oréal, the global cosmetics company, is soon to reveal its progress towards three 2025 targets linked to its Sustainability-Linked Bond (SLB), which was issued in 2022. The findings have important implications for investors, as each missed target triggers a 0.125% increased payment at maturity in June.

Our analysis finds that L’Oréal may see mixed success with its targets. The first – reaching absolute zero Scope 1 and 2 emissions across operated sites – looks highly achievable and is ranked Likely MEET. 

In contrast, the other two targets are more uncertain. Reducing ‘cradle-to-shelf’ emissions (including Scope 3) by 14% from a 2021 baseline would require a substantial improvement on recent trends. Meanwhile, achieving 50% recycled or biobased plastics in packaging appears ambitious given the company’s current trajectory. Both targets are ranked 50:50, reflecting material execution risk and limited intra-year disclosure. 

Against this backdrop, we find the bond is trading around 20bps tighter than an example comparable universe of similarly rated and similar maturity bonds. We interpret this as implying an average 40% probability that the second and third targets were missed.