Thai Union meets its first SLB target: like shooting fish in a barrel

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Thai Union (TUTB), a global seafood producer, recently announced it had achieved all three Sustainability Performance Targets (SPTs) linked to three outstanding Sustainability-Linked Bonds (SLBs). This resulted in a 10bps coupon step-down across all three bonds – a first for the market.

However, a closer look at the SPTs shows the step-down was highly probable given the company’s sustainability performance prior to the bonds’ issuance.

Thai Union linked its SLBs to three Key Performance Indicators (KPIs), covering its position in the Dow Jones Sustainability Index, its Scope 1 and 2 emissions intensity, and the percentage of fishing boats equipped with either an electronic monitoring system or human observer.

At the time the bonds were issued, the first two KPIs had already been achieved, while the third has an unclear impact on Thai Union’s sustainability. The lack of ambition inherent to the targets made a coupon step-down very likely.

There has been little pricing impact following SPT achievement, which may be because the 10bps coupon change is too small to be meaningful to investors, and/or because the bonds are close to maturity.

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