* Sustainability-linked bond only the second to hit market
* The first for an emerging market-based company
* $750 mln issue well over-subscribed, with bids of $6 bln
LONDON, Sept 11 (Reuters) - Brazilian pulp and paper producer Suzano’s recent oversubscribed $750 million carbon emissions-linked bond - the first of its kind for an emerging market firm - will likely spur others to tap strong demand from environmentally focused investors, analysts said.
The dollar-denominated issue, which priced late Thursday and attracted bids of more than $6 billion and a yield of 3.95%, is a so-called Sustainability Linked Bond (SLB), tied to Suzano cutting its greenhouse gas emissions by 15% over ten years.
Should the firm fail to be on track to reach the target by 2026, it will have to pay an additional 25 basis points on its coupon.
Bankers said the bond’s coupon - the lowest across the firm’s dollar debt trading in secondary markets - reflected strong interest from investors focused on environmental, social and governance-related matters and general confidence in the investment grade rated issuer.
“The combination worked very well in attracting strong demand from the U.S., Europe and Asia,” said a banker involved with the deal.
Suzano is only the second issuer to sell a bond under the SLB structure, after Italian energy firm Enel pioneered it with its own issue in late 2019.
While green finance structures tend to link the money raised to fund specific environmentally-focussed projects, the SLB can be tied to environmental goals at the company level.
“Emerging markets can be encouraged in their environmental progress through a number of instruments, of which transition or sustainable linked bonds are certainly part of that process,” said Geraint Thomas, head of green loans and bonds in EMEA at MUFG.
Despite the increasing amount of money chasing bonds such as Suzano’s, some investors have flagged concerns, including the ambition of the pledges made by companies looking to raise money and the degree of independent oversight of their performance. (Editing by Mark Potter)
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