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Illustration: Sarah Grillo/Axios

Walmart just raised the largest green bond ever in the U.S. corporate bond market.

Why it matters: The $2 billion bond deal illustrates that U.S. investors’ interest in green bonds is not going anywhere. Companies are tapping into that demand, and putting money behind efforts to battle climate change.

  • Funds raised from green bonds are meant to be used for environmental projects. But they can run the risk of “greenwashing” as there are no real penalties for not following through on commitments.

Driving the news: Walmart said it would put the funds toward projects including renewable energy, high-performance buildings, sustainable transportation and zero waste/circular economy initiatives.

State of play: Though the potential for greenwashing is always a concern, Walmart has a concrete sustainability plan, including being carbon neutral by 2040 and reducing emissions in its supply chain, Shawn Keegan, credit portfolio manager at AllianceBernstein, tells Axios.

  • "Walmart has a lot of influence and control over its supply chain. That's important, and it gets other retailers to think about their supply chains," Keegan says.

The intrigue: Walmart’s green capital didn’t come any cheaper than the rest of its bonds, based on their maturity and comparable Treasury benchmark.

  • Nowadays green bonds save companies an estimated 0.04% annually on average compared with their regular bonds, down from about 0.10% for green bonds placed at the beginning of the year, notes Matt Lawton, portfolio manager at T. Rowe Price. Some green bonds, like Walmart's, don't have a discernible pricing advantage.

Be smart: Besides the potential for savings, the rationale for issuing green bonds is just as much about companies signaling to the market and investors that they're taking sustainability seriously, says Keegan.

The big picture: Walmart's deal is important for the green bond sector because until now, most deals have largely been concentrated in just three industries: real estate, utilities and autos, Lawton says.

  • More sector representation means more diversification for investors.
  • "My hope is that others will follow their lead, and we'll see a more diverse set of issuers coming to the market. I think that's ultimately what we need to see for [the green bond market] to be successful," Lawton adds.

Zoom out: Global issuance of sustainable debt, which includes green, social and sustainability bonds, reached $1.7 trillion as of the end of 2020, according to the Climate Bonds Initiative, which helps certify these types of bonds.

  • Green bonds specifically reached $1.1 trillion in 2020, which is a fraction of the overall fixed income market. 

What to watch: Walmart says this is just the beginning of its foray into green bonds.

Go deeper: Amazon's climate goals take root in Brazil

Go deeper

Updated Dec 16, 2021 - Axios Events

Watch: A conversation on sustainable investing

On Thursday, December 16th, Axios energy reporter Ben Geman and business reporter Hope King dove into the forces driving investments in climate tech and looked ahead to the ESG trends shaping the market for 2022, featuring Moody’s Climate Solutions global head Emilie Mazzacurati and S&P Global Sustainable1 president Richard Mattison.

Emilie Mazzacurati discussed the most tangible outcomes from the COP26 climate conference, how these outcomes will impact sustainable investment, and how to ensure corporate sustainability commitments are actually implemented.

  • On the impact of companies setting forth climate pledges: “Setting aside those technical aspects, we found that even the companies that have set targets are not going far enough and that if all those companies reduced emissions, they would be on track supportive of a world going towards 2.1 degrees Celsius on average. So still well above where we want to be.”
  • On transparency to prevent corporate greenwashing: “So the type of things that we might look at over and beyond the actual targets themselves are governance. Is there a board-level oversight of climate risk? What’s the role of the management? Is climate integrated into risk management?”

Richard Mattison described the state of the current climate investment environment, the makeup of upcoming standard disclosure requirements, and the best and worst case scenarios in measuring companies’ progress on their sustainability commitments.

  • On the need for more specificity in climate investment pledges: “I don’t think we really have enough understanding of what the near-term plans need to look like. We don’t even know what a good transition plan looks like…I think there’s a never before seen scale of collaboration, in particular between banks, asset managers, and companies on really what a good transition plan looks like towards net zero.”
  • On best case scenarios for progress on sustainability commitments: “There is robustness and credibility in the processes used to gather that information and interpret that information. And that process means that the information is actually at the core of a scale flow of capital towards sustainable outcomes, and that we are starting to see a real difference in the real world with respect to some of those climate disasters that I was talking about before.”

Axios HQ General Manager Jordan Zaslav hosted a View from the Top segment with Head of iShares Americas at Blackrock, Armando Senra, who spoke on the impact of ESG commitments on the investment landscape.

  • “When you think of ESG, environmental, social, and corporate governance, those factors have a real impact in asset pricing in capital allocations. And therefore, what is really important there is to understand that as you’re building your portfolio, this is not just about your values or your preferences. This is about the outcomes that you are expecting in your portfolio and how you have to account for the impact and the opportunities that these factors will have in your portfolio.”

Thank you iShares for sponsoring this event.

New York AG alleges "significant evidence" of Trump Organization fraud

Combination images of former President Trump and New York State Attorney General Letitia James. Photo: Al Drago/Bloomberg via Getty Images; Scott Heins/Getty Images

New York's attorney general filed a motion Tuesday seeking to compel former President Trump and his two elder children to appear for sworn testimony in her office's civil investigation into the Trump Organization's financial dealings.

Why it matters: Attorney General Letitia James revealed new details in the court filing and a statement on her office's investigation into the Trump Organization's business practices, including a preliminary finding alleging the company used "fraudulent and misleading asset valuations to obtain economic benefits."

3 hours ago - Technology

Ex-N.Y. Post digital chief files lawsuit alleging sexual harassment

Richard B. Levine) (Photo by Richard Levine/Corbis via Getty Images

Former New York Post editor Michelle Gotthelf is suing her former employer, its parent company News Corp. and two editors, alleging she was reprimanded after complaining to senior executives that she was sexually harassed by retired N.Y. Post editor-in-chief Col Allan. The N.Y. Post issued a statement denying any wrongdoing.

Why it matters: "I felt that I owed it to myself and I owed it to the news organization and the people who answered to me," Gotthelf, who was a long time editor at the N.Y. Post, told Axios in an interview.