Sustainable Equity Issue: Schneider Electric's €650m Sustainability-linked Convertible Bonds

The new KPI bonds
Mar 9, 2021 5:10 PM ET

While structured equity was late to the ESG party, with the first green convertible bond by a European company only arriving in 2020, it caught up quickly. When EDF printed its convert in September it was the biggest green bond from a European corporate in any format. Yet it was the world’s first sustainability-linked convertible bond from Schneider Electric that most advanced ESG issuance.

Introducing the sustainability-linked format into structured equity made strategic sense in a way that moved beyond the arguments of inadequate KPIs and piffling penalties with which straight bond and loan equivalents had struggled.

At €650m Schneider’s fundraising was no minnow, though the cost of not meeting the KPIs was a paltry 0.5% one-off payment that is a rounding error against a five and a half year tenor. This lowly cost was in line with the latest SLBs, but bankers involved said focusing on the penalty was to miss the differentiator that structured equity introduced – equity exposure.

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