Dive Brief:

• Starbucks has secured a $1 billion sustainability bond — its largest of three to date — to support ethically sourced coffee. This includes purchasing coffee verified by Coffee and Farmer Equity Practices, developing and operating farmer support centers, research and development and loans to support coffee farmers, according to a press release.
• The coffee chain also partnered with lending organization, responsAbility, on a $20 million investment to support coffee communities in Latin America, Africa and Asia. The financing will be used to replace older trees with new, more productive trees, acquire new equipment and more.
• The 30-year bond will also go toward Starbucks' development of LEED-certified stores and investments in more sustainable cups and packaging.

Dive Insight:

Starbucks is using the investment for more than just helping to achieve a more sustainable global coffee supply chain. The company also plans to build 10,000 more environmentally friendly stores throughout the world by 2025, as well as roll out strawless lids and develop a recyclable and/or compostable cup. For the latter, Starbucks is one of the founding partners along with McDonald's of NextGen, an initiative by the NextGen Consortium to address single-use food packaging waste globally.

This news further solidifies Starbucks' position as an industry leader in sustainability efforts. The company, for example, opened its first LEED-certified store in 1995 and introduced ethical coffee-sourcing guidelines in 2001. The company has also partnered with Conservation International, launched the industry’s first paper beverage cup with post-consumer recycled fiber, started a sustainable coffee cup challenge and more.

A few things stand out about the sustainability bond. For starters, the company is inviting a significant amount of accountability with the requirement that it report on how the funds are spent and the impact they have. Starbucks will also publish updates each year on its public-facing website.

Second, sustainability bonds are still relatively new and very uncommon in the restaurant space. The International Capital Market Association has been tracking sustainability bonds, as well as green bonds and social bonds, since 2016. A glance at its database shows that Starbucks is the only restaurant brand listed. Investor interest in these bonds is growing, particularly as consumers become more environmentally conscious and demand the same of their favorite brands. Accordingly, Starbucks leveraging these specific investments is a differentiator that could yield a bit of a competitive advantage in the eyes of those consumers.

With such a large global footprint of more than 24,000 locations and about 3% of the global coffee sourcing, such investments can have a deep impact.

"[The bond] illustrates a trend toward heavier interest from investors in our socially and environmentally focused projects — in this case supporting coffee farmers and leading in green retail," Starbucks CFO Patrick Grismer said in the press release. "Our intent is that, by issuing a Sustainability Bond, we're providing investors an opportunity to participate in our sustainability efforts, and our hope is that this inspires others to pursue more sustainability-related investing opportunities."

Getting investors, which are typically laser-focused on short-term quarterly financial gains, to expand their focus on long-term, sustainably driven initiatives could prove to be a major turning point in environmental stewardship.