How the Principal^® sustainability bond supports business growth

A generation ago, assessing a company’s potential was often confined to a review of just profit and loss. Today, however, corporate value is driven by more than just a balance sheet.¹ That’s particularly true when it comes to evaluating sustainability.

Financial services have taken note: 87% of business leaders see sustainability investments increasing.² Eight out of ten note the tie between these investments and a reduction in costs.³

In response to internal goals and those public interest and expectations, Principal^® issued its first sustainability bond in 2021. The goal of the bond is to help support the financing of green and social initiatives, including green buildings, renewable energy, and affordable housing.

Why sustainability?

The primary Principal fiduciary responsibility remains, of course, to its customers. But a consideration of sustainability helps support business growth by helping evaluate the potential risk and opportunities companies may face.

For example, think about infrastructure such as buildings, bridges, roads, dams, and other structures and facilities. Those will need to withstand temperature shifts and weather disasters that are expected to become more routine.⁴ It follows then that a sustainability bond to support climate-resilient buildings is a tool to support sustained growth.

“We’ve seen significant changes in public investor expectations on climate change over the last few years,” says Emily Foshag, portfolio manager at Principal. Principal itself has pledged a goal of net-zero carbon emissions by 2050. “Net-zero carbon goals are now expected, and the emphasis is on what companies are doing to get there.”

Financing infrastructure that’s climate ready

In its first year, the Principal sustainability bond helped to finance a green building office project. Investors can expect to see more sustainable efforts like the Principal bond: In 2022, $948 billion in green, social, and sustainability bonds were issued globally.⁵ For the financial sector, it's gotten easier to identify these types of investments.

“It used to be about excluding certain types of investments through screening, and there wasn’t enough data to do much else,” Foshag says. “Now that there’s tons of data, this space is becoming much more complex. At Principal, we’re okay with complexity.”

For Everett Miles, vice president of capital markets for Principal, there is opportunity—not just for the issuer, but for the world.

“As a father and as a corporate leader, being on the right side of history is important to me,” he says. “What gives me hope and inspires me is the impact we can make when our values align with the values of our customers and the needs of the planet, and we invest accordingly.”