Analog Devices’ Green Bond Could Signal New Trend for Semiconductor Industry

May 18, 2020 by Shannon Cuthrell

Analog Device’s green bond issuance marks a first for the semiconductor industry.

Massachusetts-based semiconductor giant Analog Devices Inc. closed on a $400 million green bond offering in April — a first-of-its-kind move in the semiconductor industry to date. 

The proceeds from the sale will pump funding into Analog Devices’ sustainability projects. According to a prospectus filed with the U.S. Securities and Exchange Commission, ADI intends to use the investment for projects under seven categories: Renewable energy, energy efficiency, green buildings, sustainable water, and wastewater management, pollution prevention and control, clean transportation, eco-efficient, and circular economy adapted products. 

ADI stated in its announcement that these focus areas are designed in line with the United Nations’ Sustainable Development Goals platform, which provides guidance to governments and private industry stakeholders on ways to improve social and environmental practices worldwide, addressing everything from hunger, poverty and public health, to clean water and sanitation, renewable and affordable energy, and sustainable development. 

In forming its bond framework, Analog Devices aimed to follow the International Capital Market Association’s Green Bond Principles, a set of guidelines that green bond issuers can reference as they’re developing environmental objectives. In this process, ADI collaborated with Sustainalytics, market analysis, and rating platform that evaluates companies on environmental, social, and governance metrics. 

Analog devises CFO Prashanth Mahendra-Rajah stated in a news release that institutional investors are heavily interested in the company’s green bond offering, and that “this issuance further strengthens ADI’s financial position and diversifies our debt investor base.” The issuance involved 2.950% of the company’s senior notes, due April 1, 2025. ADI will pay interest on the notes semi-annually starting on October 1 of this year.

Green bonds are a relatively new phenomenon among corporations and banks interested in contributing to climate-themed objectives. While structured like any other fixed-income asset class, green bonds are meant to exclusively fund environmental, social, and corporate governance (ESG) projects. The European Investment Bank issued the first-ever green bond in 2007, then referred to as the climate awareness bond. 

The green bond trend has been picking up speed in recent years. Last year, global green bond and green loan issuance hit record levels of $257.7 billion, up 51% from 2018. Cumulatively, the global green bond market is estimated to surpass $1 trillion in size by the end of this year. However, the COVID-19 pandemic may slow that growth in the near term. 

Analog Device’s green bond issuance marks a first for the semiconductor industry. Given the increased interest in this form of capital financing among other markets, and semiconductor firms’ commitment to carbon-conscious programs, ADI’s move may prompt its peers to follow suit.