Stockholm (NordSIP) – SSAB, a Nordic and US-based steel company with the ambition of becoming the first producer of fossil-free steel, issued a five-year senior unsecured sustainability-linked bond (SLB) worth SEK2 billion.
The new bond is due in June 2026 and pays a coupon of 185bps over the 3-month Stibor, below initial price guidance. DNB Markets and SEB acted as financial advisors for the bond issue and SEB acted as advisor for the sustainability-linked finance framework. The transaction generated strong interest from Nordic investors and the issue was oversubscribed.
Sustainability-linked bonds are bonds tied to the performance of defined sustainability targets. In this case, SSAB has committed to achieving a 10% reduction of CO2 emissions by the redemption date, from the base year of 2018. In case it should fail to meet this target, the bonds will be redeemed at a 101 premium from their nominal value.
The proceeds will be used for general corporate purposes. SSAB has tied the bond to SSAB GRoup’s newly launched environmental target for GHG emissions, which has been approved by the Science Based Targets initiative, stipulating a commitment to reduce SSAB’s GHG emissions by 35% by 2032 along with key actions set out between 2021 and 2032.
SSAB’s Sustainability-Linked Finance Framework (SLFF) was reviewed by Sustainalyitics. According to the second party opinion, SSAB SLFF contributes to SDG 7 (Affordable and clean energy) and SDG 9 (Industry, innovation and infrastructure). The framework is judged to “align with the five core components of the Sustainability-Linked Bond Principles 2020 (SLBP).”
The KPIs used by SSAB to measure its performance along the goals it has set for itself. “Sustainalytics is of the opinion that the KPI chosen by SSAB is material and relevant because it speaks directly to a material environmental issue for both company and country with a wide scope of impact to total operations,” Sustainalytics’ second opinion says.
One short-fall of the framework is its exclusion of Scope 3 emissions. Scope 1 and 2 emissions represent the majority of SSAB’s emissions, accounting for approximately 68% of its total Scope 1, 2 and 3 emissions,” the second opinion adds. “Sustainalytics notes that the KPI does not cover Scope 3 emissions (measuring ~32% of the total) attributable to processing of goods and services sold and purchased by the Company.7 While these remain an important source of emissions for SSAB, Sustainalytics recognizes the steps taken by SSAB in forming value-chain partnerships with ore suppliers and customers to reduce these emissions.
Image courtesy of SSAB