Where the money goes: Verizon’s new 30-year green bond deal adds to its transparency push

Verizon Communications hit the market on Wednesday with a new 30-year corporate debt financing that will add to its arsenal of green bonds that show investors how funds have been used.

The $1 billion green bond, its fourth overall, is part of a growing trend in responsible finance that aims not only to “talk the talk” in terms of promoting better environmental, social and governance (ESG) outcomes, but to also show results.

Verizon
VZ,
+0.43%

kicked off its transparency push after launching its first green corporate bond in 2019. The telecom giant now provides public access to yearly green bond reports, detailing specific impacts and projects it funds, like its $183 million agreement to purchase solar power from Texas.

See: Verizon raises another $1 billion to push more carbon off the grid, and will provide paperwork to prove it

Initial price talk on the new 30-year Verizon bond — rated BBB+ by S&P Global and A- by Fitch Ratings — was circulated by bankers Wednesday in a range of 165 to 170 basis points above the relevant risk-free Treasury rate, according to a person with direct knowledge of the dealings.

Treasury yields have climbed sharply this year as the Federal Reserve put taming inflation in focus, with plans to raise its policy rates soon and making potentially significant cuts to its near $9 trillion balance sheet.

See: A couple of Fed officials wanted to stop buying bonds sooner than March

The 10-year Treasury yield
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2.038%

was near 2.05% at last check late Wednesday, while the 30-year rate
TMUBMUSD30Y,
2.360%

was closer to 2.4%, according to FactSet data. Corporate bonds are priced at a premium, or spread, above risk-free Treasurys, with an aim to compensate investors for default risks.

Spreads on BBB rated U.S. corporate bonds climbed to about 136 basis points above Treasurys recently, from near post-2008 lows in September of around 107 basis points, according to the ICE BofA BBB US Corporate Index.

Verizon said in a public securities filing on Wednesday that it plans to help develop, construct or purchase renewable energy with its latest green bond, while also providing subsequent environmental impact results.

Verizon shares were up 0.4% on Wednesday, as the broader stock indexes
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+0.14%

turned higher after the release of Federal Reserve meeting minutes from January reiterated support for higher rates and a smaller balance sheet.

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