Mastercard follows Visa to issue first Sustainability Bond
Building on its pledge to achieve net zero emissions by 2050 and commitment to bring 1 billion people and 50 million small businesses into the digital economy by 2025, Mastercard has issued its first-ever Sustainability Bond, priced at US$600 million at a fixed rate of 1.90%.
Mastercard is the second major player in the payments industry to issue such a bond, following Visa which unveiled a green bond back in August 2020.
Mastercard’s Sustainability Bond proceeds will support both “social and green initiatives to drive inclusive and sustainable growth for our company and the communities we serve around the world”, according to Michael Miebach, CEO.
Investors will now have the opportunity to contribute to the advancement of these efforts. Specific green and social projects will align across 11 areas and will contribute to the advancement of the US Sustainable Development Goals.
The 10-year bond will pay interest semi-annually at a fixed rate of 1.90% and Mastercard expects to allocate the net proceeds from the Sustainability Bond to eligible initiatives within three years of the transaction.
Building inclusive and sustainable digital economy
Lat year, Mastercard reached a global milestone of achieving financial inclusion for 500 million previously unbanked people and further committed US$250 million to supporting the recovery of small businesses global and US$500 million to closing the racial wealth gap in the US.
On the environment front, as well as pledging to net zero emissions, Mastercard was first in the payments industry to gain Science Based Targets initiative (SBTi) approval for its GHG goals, aligning with the Busineess Ambition for 1.5C pledge. The company has also achieved its goal of 100% renewable electricity and is committed to regerow 100 million trees over 5 years through the Priceless Planet Coalition.
Rise of the sustainability bond
Broadening public awareness has made ESG topics increasingly relevant for North American banks, as regulators, investors, customers and other stakeholders increase their focus on banks’ attitudes and policies on climate change and economic inequality issues.
Since 2013, the Bank of America has issued five green bonds, two social bonds and its latest ‘sustainabiity’ bond in September last year, a US$2 billion first-of-its-kind broad ESG-themed security designed to advance racial equality, economic opportunity and environmental sustainability.
Payments giant Visa was the first digital payments network to unveil a green bond, back in August 2020. Priced at US$500 million, it is being used to finance an array of projects designed to reduce Visa’s greenhouse gas emissions.
In banking, Citigroup issued ts first USD-denominated benchmark green bond in May 2020, and in September 2020, JP Morgan Chase completed its in augural green bond issuance of US$1 billion bonds, while the same month Goldman Sachs issued its first-ever sustainability bond, valued at US$800 million, with proceeds used to finance loans and investments made in projects and assets such as clean energy, sustainable transport and financial inclusion.
Charting the rise of the chief sustainability officer
There has been a dramatic increase in the hiring of the chief sustainability officer (CSO) role among Fortune 500 companies, with demand for CSOs growing 228% in corporate America over the last decade, according to the latest report from CSO recruitment firm the Weinreb Group.
There were more first-time CSOs recruited by Fortune 500 companies in 2020 than the previous three years combined, with numbers of CSOs in corporate America soaring from just 29 in 2011 to 95 today, demonstrating the importance corporations are placing not just on reducing their environmental impacts, but also in supporting issues of social justice.
Businesses are increasingly under pressure to assume more responsible practices with customers, regulators and investors demanding increased transparency of business ESG performance.
And the past year in particular has been seen great upheaval, with increased new attention brought to “social justice, climate change, and an ever-widening political divide”, according to Ellen Weinreb, founder and CEO of the Weinreb Group, which has tracked the rising role of CSOs over the past decade.
CSO role is expanding and shifting
But it’s not just the number of CSOs that have changed, sustainability teams are getting bigger, with the average team size increasing from five professionals in 2011 to 15 today, according to the report.
This is in part due to the fact that the CSO role has expanded beyond simply ‘sustainability’ to incorporate social justice too. Sustainability isn’t exclusively about the environment anymore. The role has also come to incorporate social justice, especially with the rapid growth of, and increased attention on, environmental, social, and governance, or ESG.
And many roles recently have been renamed as such with Head of ESG or ESG Officer becoming increasingly prominent.
Women make up over half of CSO roles
What's also changed over the last decade is the percentage of women holding the title of Chief Sustainability Officer.
A decade ago, in 2011, the majority of CSO roles were held by men (72%), with just 10 of the 29 then CSO roles held by women. A decade on, in 2021, the percentage of women in CSO roles has almost doubled, now accounting for more than half (54%) of CSO positions.
However, according to the report ‘The Chief Sustainability Officer 10 Years Later’, despite the movement toward gender balance within the role and its expanded focus on social justice, in particular, in 2021 the CSO position remains overwhelmingly ‘white’.
Probably not surprising considering there are just three black CEOs at Fortune 500 firms.
How the chief sustainability officer role has grown
The first-ever named chief sustainability officer in a US publicly traded company was Linda Fisher for Dupont, who joined the chemical giant in 2004 as CSO, just at the time when innovative companies were looking at sustainability as a driver for business growth. Joining from the Environmental Protection Agency where she spent 13 years, Fisher was a corporate sustainability trailblazer, spending more than a decade as CSO here, and leading DuPont’s efforts to establish its first set of market-facing sustainability goals.
By 2006, a slew of firms had joined the CSO movement, including Mastercard, Nissan and Microsoft; and Kellogg’s became the first firm to replace a CSO with Dianne Holdorf taking over from Celeste Clarke. And by 2011, a decade ago, Coca-Cola, Verizon, AT&T and P&G had appointed their first CSOs.
In fact, it was in 2011 when Virginie Helias invented her idea of the perfect CSO job – to make sustainable consumption not only possible, but ‘irresistible’ – and pitched it P&G’s then CEO. A decade later, in 2021, and Helias is still in the job she first created.
The majority of CSOs have been internal hires, such as Peter Graf of SAP, who joined the software giant in 1996, and served as EVP for Marketing before being named CSO in 2009. The same is true at UPS, whose first-ever CSO, Scott Wicker, started at the package delivery giant 34 years before being named CSO in 2011. Increasingly, however, external hires are being made with organisations increasingly searching for more high-profile leading voices in the ESG forum.
In February 2021, JP Morgan hired former British high-profile Labour politician Chuka Umunna while just last month hotel chain Accor hired high-profile French politician Brune Poirson, who has previously championed the anti-waste law within the French government and was secretary of state for the environmental transition for three years.