Toyota’s $750M Green Bond Backs Buying, Leasing Environmentally Friendly Vehicles

Toyota sees green bonds—this one being their fifth—as an important tool to fund the sale of environmentally friendly vehicles, while providing an attractive option for sustainability investors.

Green Bond Toyota

Plano-based Toyota Financial Services (TFS) is making financing more readily available for people waiting to buy one of its environmentally friendly Toyota and Lexus vehicles.

On Friday, Toyota Financial Services—the insurance and financing arm of Plano-based Toyota Motor North America—announced its latest unsecured green bond, a $750 million offering, the proceeds of which will go to funding new retail installment contracts and operating lease contracts to finance Toyota and Lexus vehicles that qualify under specific clean air criteria, including powertrain, fuel efficiency and emissions.

“We provide the financing and leasing solutions that enable customers to get into the Toyota or Lexus of their choice,” Toyota Financial Services CFO Scott Cooke said in a statement. “Our green bonds are an important tool that TFS uses to fund the sale of environmentally friendly vehicles while providing an attractive option for sustainability investors.”

Green bonds are aimed at environmental projects

Green bonds are a way for an issuer to raise money specifically for environmentally friendly projects, such as clean transportation or renewable energy, according to Bloomberg. Green bonds came on the scene roughly a decade ago and have boomed in recent years as companies develop socially conscious debt products. 

Toyota Financial Services said its green bonds are an important tool in marketing Toyota’s environmentally friendly vehicles. Toyota introduced the first commercial hybrid electric car, the Prius, in 1997. Since then, Toyota said its hybrids have reduced CO2 emissions by 108 million tons versus comparable gasoline-powered vehicles.

Bloomberg said that there is a growing demand for green bonds among investors seeking more-sustainable options. Many industries have embraced them—energy, transport, waste management, building construction, water, and land use—Bloomberg said.

CNBC noted that 2019 saw a record number of green bonds issued worldwide with financial institutions and governments issuing $185 billion total to fund environmental projects. CNBC went so far as to label green bonds a potential “mega trend.”

Seven Toyota, Lexus vehicles qualify

As Toyota issues its new green bonds, the carmaker said that seven of its vehicle models in the Toyota and Lexus lineup qualify under the bonds’ criteria. The vehicles must:

  • Possess a gasoline-electric hybrid or alternative fuel powertrain;
  • Achieve a minimum of 40 highway and city miles per gallon (MPG or MPG equivalent); and
  • Receive a Smog Rating of 7 or better (where 10 is the cleanest), as determined by the United States Environmental Protection Agency for the purchase of a vehicle in California.

 

And, Toyota said it has increased the vehicle eligibility requirements from 35 miles per gallon to 40 miles per gallon.

Qualifying vehicles include the Toyota Avalon Hybrid, Toyota Camry Hybrid, Toyota Corolla Hybrid, Toyota Mirai, Toyota Prius, Toyota Prius Prime, and the Lexus ES 300h. TFS said it revolutionized the green bond market by introducing the auto industry’s first-ever asset-backed green bond in 2014. 

This new issuance is Toyota Financial’s fifth green bond, and its first-ever unsecured green bond offered in U.S. dollars. Its green bond program is unique in the auto industry and enhances Toyota Motor Corp.’s reputation for leadership in green innovation.

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