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DEARBORN, Mich., Nov 4., 2021 – Ford Motor Company and its financing subsidiary, Ford Motor Credit Company, today introduced the North America auto industry’s first sustainable financing framework, focusing on and paying for ambitious plans in vehicle electrification and other environmental and social areas.
Separately, Ford today also announced a cash tender offer to repurchase up to $5 billion of the company’s higher-cost debt. Actions such as the debt tender offer and the issuance of 0% convertible notes earlier this year, together with anticipated broader access to capital from the new sustainable financing framework, are consistent with Ford’s objectives to further strengthen its balance sheet and financial flexibility and return its credit ratings to investment grade.
“Winning businesses are financially healthy and lead in sustainability – it’s not a choice, they rely on each other,” said John Lawler, Ford’s CFO. “We’re again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford.”
Today’s announcement was made on the fifth anniversary of the Paris Climate Agreement, as Ford executives joined world leaders, environmental advocates and other forward-looking companies at the United Nations Climate Change Conference (COP26) in Glasgow, Scotland.
Among other expected benefits, initiatives outlined in Ford’s sustainable financing framework are intended to help the company become carbon neutral no later than 2050, in line with its commitment to the Paris Agreement. Ford was one of the first full-line U.S. automakers to pledge to reduce greenhouse gas emissions from its vehicles, operations and supply chain in alignment with goals of the accord. This pledge is backed by science-based interim targets the automaker intends to achieve by 2035.
The potential positive environmental and social influence of projects described in Ford’s sustainable financing framework earned an “advanced” rating – the highest possible – from Vigeo Eiris. Vigeo Eiris, an arm of Moody’s Corp., makes independent assessments of organizations’ goals and performance against environmental, social and governance matters.
Guided by aggressive environmental and social goals, a significant portion of related financing will go toward accelerating Ford’s leadership in electric vehicles. Objectives include expanding EV technology and charging infrastructure to remove obstacles to adoption and improve the customer experience, and EV and battery manufacturing to reduce emissions.
“We’re going to build high-quality electric vehicles at scale and do so in a way that has a positive impact on people and the environment,” said Bob Holycross, Ford’s vice president, Sustainability, Environment and Safety Engineering. “In communities where air pollution and climate change are disproportionate burdens today, access to EVs can have the additional benefit of moving people to the front of the line for the health, economic and mobility benefits these vehicles can provide.”
How Ford’s Sustainable Financing Framework Works
The framework will cover a variety of both unsecured and securitization funding transactions, including ESG bonds issued by Ford and Ford Credit to finance environmental and social projects, and how Ford’s electrification and mobility projects will be evaluated and selected. The framework will also govern how the proceeds will be managed and how Ford and Ford Credit will report results. Funds will be fully allocated within 24 months of each sustainable financing issuance.
Net proceeds from sustainable financing will be invested and expended in four areas:
Ford’s sustainable financing framework aligns with its ambitious sustainability goals, as well as environmental and social principles and best practices established by the International Capital Market Association and the Loan Market Association. Those groups counsel transparency, disclosure, measuring impact and external reviews in sustainable financing.
In addition to external verification, a new sustainable financing committee established within Ford will assure that funded projects comply with Ford’s corporate social responsibility strategic plan and otherwise meet eligibility criteria. The committee comprises senior representatives from Treasury, Sustainability, Corporate Finance, Investor Relations, Ford Credit and Legal.
Committed to a Sustainable Future
Ford’s extensive support of and leadership at COP26 will include joining with other signatories to the ambitious RouteZero initiative. Led by the international non-profit the Climate Group and the United Nations High-Level Climate Champions, RouteZero aims to reduce carbon associated with road transportation. More than 50 businesses, cities and regions have pledged to work together toward 100% zero-emission cars and vans globally by 2040, and in leading markets no later than 2035.
Additionally, Ford’s Holycross will address high-level business representatives, financiers, government officials, policymakers, innovators, members of academia and environmental influencers at the World Climate Summit: The Investment COP on Nov. 7. The event is a leading forum for business- and investment-driven solutions to climate change convened by the World Climate Foundation. In his remarks, Holycross will focus on Ford’s substantial sustainability accomplishments to date, and how the company is focused on leading the electric revolution at scale.