Biggest Bearings Maker Signals Appetite for Green Debt

(Bloomberg) --

Sweden’s SKF AB, the world’s largest bearings maker by revenue, says it’s “inevitable” that the company will look at more green financing as it aims for carbon neutrality within the next 10 years.

Green bonds are “a very credible and viable way for us to raise finance, it’s very likely that we’ll do that again,” said Rob Jenkinson, SKF’s operational and group environmental, health and safety manager.

SKF was one of the first industrial companies globally to issue a green bond, when it raised 300 million euros ($355 million) late last year, at a coupon of 0.875%. The 10-year note was cheaper than the company’s existing debt.

Jenkinson wouldn’t say when SKF might issue another green bond, but noted that last year’s sale attracted four times the amount on offer. The 2019 bond is now marked at a price of 102.3 and a yield of 0.6%, according to data compiled by Bloomberg.

Read More: ‘Greenium’ Cuts Debt Cost as SKF Sells First Environmental Bond

Another possible financing route for the bearings manufacturer is sustainability-linked bonds, which are tied to key performance targets, rather than the note’s use of proceeds.

This type of instrument is “in our toolbox and we are evaluating the market,” said a spokesman for SKF, who added that the company isn’t actively looking into it as there isn’t a financing need.

Kent Viitanen, who heads SKF’s bearing operations, says the company for now is focusing more on driving a reduction in energy consumption, as well as the sourcing or self-generation of green energy alternatives.

Between 2006 and 2019 SKF says its carbon emissions decreased by 36%, while revenues grew more than 60%. “We have been able to de-couple the economic growth from the carbon impact of our production activities,” the spokesman said.

SKF’s plan to achieve a carbon-neutral manufacturing footprint is not without its difficulties.

“There might be a challenge, coming into 2030, that we have not managed to eliminate some of the non-green energy sources,” said Viitanen, and that the purchase of carbon offsets would be considered as a last resort.

Roller bearings are used to reduce friction in moving parts such as shafts and wheels and to transfer load between machine parts. This wide application means they’re used across the manufacturing space, with SKF noting about 9,000 customers in over 40 sectors. Order sizes can range from less than 10 to over 100,000 pieces and industrial distributors have a key role in supplying the final customer.

--Johnson Imode, Bloomberg Intelligence (Aug. 28)

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