Toyota Financial Serves Up First Euro-Denominated Green Bond

Toyota Financial Services issued its first-ever euro-denominated, unsecured green bond earlier this week, expanding the captive’s commitment to the sale of environmentally friendly vehicles, according to a company press release.

Green bonds are securities whose proceeds are used for projects that promote environmentalism. This ABS marks the fourth green bond the company has issued.

The €600 million bond — $707.8 billion USD — will be used to fund the acquisition of new retail finance contracts and beneficial interests in lease contracts for nine Toyota and Lexus vehicles that meet specific clean air criteria, including fuel efficiency, emissions, and powertrain, according to the release.

Toyota Financial first entered the green bond market back in 2014 with the auto industry’s first-ever asset-backed green bond. Toyota’s $1.75 billion worth of bonds was used to finance the purchase of high-efficiency vehicles — any of the four Prius variants, Camry Hybrid, Avalon Hybrid, RAV4 EV, Lexus CT 200h and Lexus ES 300h — according to published reports at the time.

In fact, the company’s entrance into the green bond market garnered it an Auto Finance Excellence Award in 2015. TFS won the award for innovation in socially responsible funding.

The Plano, Texas-based captive worked with BNP Paribas and Credit Agricole in an effort to adapt its green bond program to the needs of European fixed-income investors, according to the release. Additionally, Barclays, ING, and Unicredit joined as the joint lead managers for the captive’s fourth bond issuance.

“Green transportation has been firmly in the headlines as an important social and political issue, in which Toyota has taken a strong lead,” said Stephanie Sfakianos, Head of Sustainable Capital Markets at BNP Paribas. “BNP Paribas is delighted to have worked with them on their first euro-denominated Green Bond. Europe is home to over half the world’s ‘SRI’ investors, where demand for such paper significantly outstrips supply. This is reflected in the success of the transaction.”

The TFS green bond program was reviewed by Sustainalytics, a global provider of environmental governance research, ratings, and analytics, according to the release.

“Toyota’s environmental technology leadership and dedication to environmentally sustainable business practices is well-known,” Cindy Wang, the captive’s vice president of treasury, said in the release.  “What many people may not realize is that we apply this same level of environmental consciousness when developing our funding programs. Our latest euro-denominated green bonds will help put even more environmentally friendly vehicles on the road.”