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Co-op’s £300m bond will support Fairtrade producers

The UK’s Co-operative Group has raised a £300 million (US$379 million) bond to support the Fairtrade Foundation’s products. The sterling bond is categorised as “sustainable”, which means it meets the United Nation’s Sustainable Development Goals.

The mutually-owned society, established in 1844, is a major grocery store chain in the UK and offers financial and other services from insurance to funerals.

The Co-op bond offered a 5.125% coupon over five years and met with strong demand from financial institutions seeking sustainable investments. The proceeds will be used to ship Fairtrade products ranging from coffee and tea to wine and bananas, produce new ones, and fund marketing.

Although the offering was restricted to institutional investors, the society indicated that it could issue up to £900 million of sustainability bonds to access more responsibly sourced products and deliver energy efficient technology to reduce emissions. These future offerings might be extended to individual investors

While the offered rate of 5.125% is high relative to the Bank of England’s current base rate of 0.75%, it is lower than the Co-op’s prevailing debt costs and part of the bond’s proceeds are being allocated to a £450 million bond due for repayment next year at a rate of 6.875%.

“The popularity of this bond demonstrates confidence in the Co-op’s growth strategy and in particular how we’ve placed sustainability at the heart of our future plans,” said Co-op chief executive Steve Murrells.

“Co-op was an early pioneer of Fairtrade, and now with the support of like-minded investors we can grow it further, opening up new opportunities and creating value for our members as well as producers and communities in developing countries.”

Ethical goals

Fairtrade is an independent, not-for-profit ethically-minded foundation dedicated to promoting trade in goods produced without exploitation. It was established in 1992 by six organisations, including charities Christian Aid and Oxfam as well as the Catholic aid agency Cafod.

The Fairtrade mark on products such as chocolate, coffee and sugar indicates that a minimum price was paid to producers and workers in developing countries. Over 1.6 million farmers currently depend on Fairtrade for a sustainable living, according to the Fairtrade Foundation.

The Co-op’s sales of Fairtrade products grew by 6.3% in 2018, although Fairtrade’s overall sales in the UK market fell by 8.3% with some other UK supermarkets reducing their range of Fairtrade offerings. The aim of providing farmers and their workers a better deal also means that Fairtrade products are typically more expensive to produce and import and have a lower profit margin.

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