Compass Group’s sustainability lead Amy Keister tells Nick Hughes how the caterer will use proceeds from the sector’s first sustainable bonds to turbocharge its net-zero commitment.
“There is no doubt about the scale of the environmental challenge that we face. To tackle that challenge effectively and sustainably requires us to harness the delivery capacity of the market economy – and in particular to mobilise the enormous resources of our capital markets through green finance.” So said the then chancellor Philip Hammond and business secretary Greg Clark in the foreword to the UK government’s green finance strategy 2019. Both men feel like relics from the political Pleistocene given the chaos of the subsequent three years but the salience of the point remains: if we’re to transition to a net-zero economy by 2050 the financial sector will have a key role to play.
What does this mean for the foodservice industry? Quite a lot as it happens. This summer, catering giant Compass Group claimed a sector first after two sustainable bonds, worth €500m (£437m) and £250m respectively, were listed on the London Stock Exchange main market. The proceeds will be used to advance the group’s sustainability initiatives and the delivery of its global commitment to achieve net-zero by 2050 and be carbon neutral worldwide in its own operations by 2030.
A bond is essentially a debt issued by a business (or government) to raise money to invest in its operations. Although still in its infancy within the food sector, sustainable finance – including bonds – is growing in popularity with investors who want to better manage climate risk and have their investments deliver social and environmental goods. In 2021, the global value of sustainable bonds reached $1trn (£0.9trn), according to financial markets data provider Refinitiv, representing a 20-fold rise from 2015.
From a company’s perspective, the London Stock Exchange notes how dedicated sustainable or green bonds can give them access to a deeper pool of capital as well as provide a public signal that the business has a meaningful sustainability strategy in place. For Compass Group specifically, global director of sustainability Amy Keister says sustainable financing is “a crucial part of our overall strategy” in support of its 2050 net-zero goal. “We really thought that in order for us to continue on that journey this was the next logical step,” she tells Footprint. Compass Group corporate communications director Giles Robinson adds that there's a lot of demand and interest from ESG investors in Compass generally “so this is really to appeal to them, and obviously to strengthen our ESG credentials as a group”.
Compass may be the first foodservice operator to dabble in sustainable bonds but it was Co-op which claimed a UK-first for a retailer by raising £300m through a sustainability bond issued in 2019. Co-op said at the time that proceeds would be allocated exclusively to its work on supporting and promoting Fairtrade, including Fairtrade producers and their communities.
Fairtrade producers can also expect to receive a boost from Compass’s bonds. The business has developed a new sustainable financing framework in which it details the types of project that will qualify for funding. These include spending on goods which are certified sustainable, Fairtrade or organic; the costs of electrifying the transport fleet; use of renewable energy; promotion of plant-based products; the promotion of reusable packaging items; and investment in regenerative food production.
Other eligible projects include those focused on food waste reduction including measurement technologies and systems. Food waste is a priority area for funding in the short term, explains Keister. “We really believe as the world’s largest foodservice provider that’s where we can have the greatest impact immediately,” she says, noting the “huge” contribution food waste makes to global greenhouse gas emissions.
In the UK & Ireland specifically, there will be an “accelerated investment in carbon tools” to reflect the fact that the target for net-zero greenhouse gas emissions is 2030 – well ahead of the group-wide target. Keister explains this investment will involve “how we actually look at our scope three emissions and reporting to clients, reporting for regulations, […] and also looking at carbon labelling”. She adds that the UK market is “a great example to learn from and then we can apply [those learnings] to the rest of our markets”.
Investment in regenerative agriculture is another “huge area of focus” for Compass globally. Keister notes how “the majority of our impact when it comes to climate change is from our procurement and that's where we can have the greatest influence”. The UK business has a target for 70% of the top five food categories (dairy and cheese, fruit and vegetables, pork, beef and chicken) to be sourced from regenerative agriculture by 2030. Compass is already increasing the use of certain cover crops, like farro and sorghum, on its menus. Keister says the business will continue to work closely with its suppliers to encourage them to adopt more regenerative practices and will be “first in line to procure those goods”.
Initiatives that receive proceeds from the bonds will not be required to deliver both social and environmental benefits – although “typically they do both”, says Keister – hence why some spend will go on products sourced from local, socially diverse or minority suppliers.
Proceeds will fund projects across the span of Compass’s global operations and will be allocated according to market size. This means America – by some way its biggest market – will receive over 60% of the funding with the UK & Ireland receiving around 10%.
Compass has also committed to publish an annual green financing report in which it will disclose how the proceeds have been allocated alongside the environmental and social impacts of the financed projects. “It's crucial for us that we're very transparent on this journey,” says Keister.
Going forward, Compass expects to employ a mix of conventional financing and sustainable/green financing to meet its requirements. This may include further sustainable bonds as well alternative sustainable and green finance structures such as private placements, revolving credit facilities and bank loans.
It hopes the sector’s first sustainable bond will deliver additional operational benefits across the business by reinforcing more sustainable practices and behaviours among employees. Sustainability “is really part of our culture and it's not just something [we’re doing] in a silo”, Keister says.
Compass may have made the first foodservice sector move towards more sustainable financing, but amid growing interest in ESG investments it’s unlikely to be the last.