Jun 12 2023
Major chemical producers, including LyondellBasell, Air Products, Eastman Chemical, and Covestro, have issued green bonds to help fund projects relate to net-zero and decarbonization initiatives. These can include projects related to circular economy, advanced recycling, hydrogen production, and battery materials – key areas of interest as the chemical industry looks to ramp up its net-zero efforts.
A green bond is "any type of bond instrument where the proceeds or an equivalent amount will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible green projects," according to the International Capital Market Association's (ICMA) statement of green bond principles, which were last updated in 2021. An "eligible green project" could include investments in areas such as energy efficiency, renewable energy, pollution prevention and control, circular economy products, and sustainable water management, among other areas, according to ICMA.
Circular economy is a major investment theme for the green bonds issued so far by chemical companies. LyondellBasell, which completed a $500 million green bond offering last month, highlights circular economy projects in the company's Green Bond Framework, which was published along with the bond offering. "We are taking steps to increase our plastics recycling capacity to tackle the challenge of plastic waste and make progress on our goal to produce and market two million metric tons of polymers from recycled or renewable-based sources annually by 2030," LyondellBasell said in the framework. The company highlighted a line of products made via mechanical or advanced recycling, as well as the launch of its circular and low carbon solutions business.
Green bonds provided a logical way align financing with the company's sustainability goals, LyondellBasell told CW. "LyondellBasell has clear ambitions in the circular and low carbon solutions space," the company said. "We view this as a key growth driver of our business." The circular and low carbon solutions business will account for about 15% of LyondellBasell's capital expenditures through 2030, the company added. "We expect LyondellBasell's capital expenditures will average $2 billion annually from 2023 through 2025 and remain within historical ranges through 2027."
Covestro and Eastman Chemical also plan to use capital raised from green bonds to fund circular economy projects. "Covestro can leverage procurement on the one hand and the development of our own innovative process technologies for CO2 use, biotechnology, and plastics recycling using chemical means, on the other hand," the company said in its green financing framework last year.
Air Products, which raised more than $1.3 billion in a multi-currency green bond offering in March, has emphasized its role in the hydrogen economy. The green bond offering "makes us the first US chemical company to issue with green and blue hydrogen as an eligible expenditure category, further reinforcing our leading position advancing the energy transition through hydrogen for zero-emission transportation and industrial decarbonization," Air Products CEO Seifi Ghasemi said.
Air Products plans to spend $15 billion in capex on energy transition projects through 2027, including major investments in green and blue hydrogen production, as well as carbon capture and storage (CCS). Projects are underway in Saudi Arabia, Canada, and at three locations in the US.
LG Chem, meanwhile, plans to invest the $300 million it raised in a green bond offering in July 2022 in areas related to electric vehicle (EV) battery materials, such as cathode materials and separators. The offering came on the heels of a $1 billion green bond issue in mid-2021. The company is targeting over $22 billion in battery materials sales by 2030, a roughly six-fold increase from 2022.
LG Chem's green bond proceeds have helped fund a capacity expansion for cathode materials at a plant in Cheongju, South Korea, among other projects, the company said in its last green bond impact report in September.
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