Project Details
Project
Arcos Dorados Sustainability-Linked Financing Framework Second-Party Opinion (2023)
Client
Arcos Dorados Holdings Inc
Project Type
Sustainability Linked Bond or Note
Industry Group
Consumer Services
Use of Proceeds
N/A
Location
Uruguay
Evaluation Date
Oct 2023
Evaluation Summary
Sustainalytics is of the opinion that the Arcos Dorados Sustainability-Linked Financing Framework aligns with the Sustainability-Linked Bond Principles 2023. This assessment is based on the following:
Selection of Key Performance Indicators (KPIs)
Arcos Dorados Sustainability-Linked Financing Framework includes two KPIs – KPI 1: reduction in absolute GHG emissions scopes 1 and 2 (tCO2e) and KPI 2: GHG emissions intensity scope 3 reduction (tCO2e/ tonnes of food and packaging across Arcos Dorados’ operations) (see Table 1). Sustainalytics considers both KPIs 1 and 2 to be very strong given the high scope of applicability, over 98% of total emissions, on a combined basis. Furthermore, both KPIs are considered to be measurements on material issues and are externally benchmarkable.
Calibration of Sustainability Performance Targets (SPTs)
Sustainalytics considers the SPTs to be aligned with the issuer’s sustainability strategy. Sustainalytics further considers SPT 1 to be ambitious and SPT 2 to be moderately ambitious based on the lack of historical performance, alignment with industry peers, and where possible alignment with science-based targets.
Security Characteristics
Arcos Dorados will link the financial characteristics of any security issued under the Sustainability-Linked Financing Framework to the achievement of the SPTs, namely a coupon step-up in case: i) KPI 1 or KPI 2 has not been achieved by the observation date of the respective SPTs; or ii) the Company fails or is unable to provide satisfactory notification in accordance with the financial instrument’s documentation.
Reporting
Arcos Dorados commits to report on an annual basis on its progress on the KPIs in its corporate sustainability report or similar report on its website. Additionally, the Company commits to disclose relevant information that affect KPI performance. The reporting commitments are aligned with the SLBP and SLLP.
Verification
Arcos Dorados commits to have external limited assurance conducted against the performance of each SPT and for each KPI at least once a year and whenever relevant, leading to a potential coupon adjustment, which is aligned with market expectations.