Nissan: shift expectations with an SLB?

10 minute read

Japanese carmaker Nissan published its Sustainable Finance Framework in July 2022. This is part of a market trend of increasing issuance of green, social and sustainability bond (GSS) by the auto industry. These products have been successful at raising capital for sustainable investment in the sector. However, the pricing benefit to issuers has been minimal.

Sustainability-Linked Bonds (SLB) have yet to be used by auto manufacturers. A key benefit of SLBs is that they offer a way for issuers to reduce financing costs.

We propose an SLB for Nissan based on its existing sustainable finance framework. We provide hypothetical pricing, which shows that Nissan could achieve an estimated discount of 14bps on its five-year financing spreads. In a capital-intensive sector, successful use of such a product could provide a tangible financial advantage and help auto manufacturers to invest for the clean transition.

Automakers are an attractive sector for global investors looking for SLBs. The contribution to the reduction in carbon emissions from auto manufacturing is very significant and the transition to electric vehicles will lower the contribution to GHG emissions globally.

Additionally, Nissan has the opportunity to build on its track record as an issuer of sustainability bonds by issuing an SLB. Lastly, Nissan can lower its cost of capital by linking its KPIs to a reduction in the coupon of its SLBs.