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Ford selling first green bonds as it shifts to electric cars

Al Drago
A Ford Motor Co. E-Transit electric vehicle during a presentation in Washington, D.C., July 28, 2021.


Ford Motor Co. is selling bonds aimed at benefiting the environment, a first for the automaker and part of its transition to electric vehicles.

The Dearborn, Michigan-based company is marketing green bonds expected to mature in 10 years, according to a person with knowledge of the matter. Early pricing discussions anticipate a yield in the 3.625% area and net proceeds will be used exclusively for clean transportation projects and for the design, development and manufacturing of its battery electric-vehicle portfolio, the person said.

Ford said last week that it plans to cut its borrowing costs by more than half as it repurchases $5 billion in junk-rated debt and seeks to set a path to return to an investment-grade credit rating. At the time, the company said it expects to raise at least $1 billion in this new green bond offering, a move that’s part of a new sustainable financing strategy based on environmental and social goals.

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“This lowers the cost of our debt substantially,” John Lawler, chief financial officer, said in an interview last week, when the company disclosed its repurchase plans. “It provides us additional financial flexibility, not only from the standpoint of lower interest expense, but also it’s strengthening the balance sheet, which is good as we work to return to investment grade.”

Companies globally are under pressure from their consumers, investors and regulators to cut carbon emissions and are tapping the fast-expanding sustainable finance world to fund the transition. Global sales of green bonds are at more than $447 billion so far this year, a record level and nearly double the $234 billion raised in the whole of 2020.

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Ford aims to become carbon neutral no later than 2050 and a significant portion of the funds raised through its sustainable finance strategy will go toward expanding electric vehicle technology and charging infrastructure and improve the customer experience.

“We’re again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford,” Lawler said in a statement last week.

Barclays is leading the bond sale, which is expected to be sold on Monday.

“It is a strong example of a legitimate green bond,” James Rich, a senior portfolio manager at Aegon Asset Management, said via email. “It passes our proprietary labeled bond assessment process with their focus on zero-emission vehicles and associated infrastructure, and is strongly aligned with long-term trends towards a sustainable global economy.”

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