Most businesses recognize the importance of reducing carbon emissions and increasing efficiency in their operations. However, one area that is often misunderstood is how projects that drive sustainability progress are financed. Green bonds are one example of a financing mechanism that can help companies align their financing needs with their sustainability strategy.
Green bonds can serve as an important tool in a business’s capital structure while allowing debt investors to support projects with clear environmental benefits. By tapping into the green bond market, organizations can access a broader pool of capital from potential investors.
Green bond issuers may also benefit from accessing capital at attractive rates. Green investors want their capital to support projects that align with their investing principles. In return for supporting sustainable projects, green bond investors accept lower yields than they would get from conventional bonds.
Why does Equinix use green bonds?
At Equinix, we view green finance as an integral part of our sustainability strategy. We issued our inaugural green bond in 2020, and we have since become one of the 10 largest U.S. corporate issuers in the investment-grade green bond market.
To date, we have issued approximately $5.6 billion of green bonds in total, including our announcement last month of issuing more than $750 million in green bonds. We estimate that our current green bond portfolio helps us save between $2 and $3 million annually, or about $30 million over the lifetime of the portfolio.
We’re committed to building the most sustainable data center and digital infrastructure platform possible, and green bonds help us demonstrate that commitment in a clear, quantifiable way. Over the last five years, our green bonds have funded 172 green building projects across 105 sites, 33 energy efficiency projects and two power purchase agreements (PPAs).
How we use the proceeds from green bonds
After we issue a green bond, our target is to reach 100% allocation of the proceeds within 36 months, thus demonstrating our commitment to put funding to work quickly. The proceeds must be used for projects with clear environmental benefits, called Eligible Green Projects. We ensure that we have a healthy pipeline of these projects already in place before we consider issuing green bonds.
The net proceeds of $4.9 billion from our first six green bond offerings—everything except the newest bonds announced last month—were fully allocated as of June 2023. We have allocated against several categories of Eligible Green Projects, including green buildings, energy efficiency and renewable energy.
Green buildings
As the world’s digital infrastructure provider, Equinix continues to expand our global scale to serve customers better in more locations. When we design new facilities with green principles in mind, we can drive sustainability benefits for many years to come. Green building projects involve the design, construction or maintenance of data centers that meets certain efficiency standards.
Power usage effectiveness (PUE) is the primary efficiency metric for data centers. The closer its PUE is to 1, the more efficient a data center is. To be considered a green building project, a data center must have an average annual PUE of 1.40 or lower in Asia-Pacific and Latin America, or 1.35 or lower in EMEA and North America.
We often use green bonds to pursue sustainable building certifications such as LEED. For instance, Equinix PA10, our newest Equinix IBX® colocation data center in Paris, was financed using green bonds and built to target LEED certification. The facility was designed for optimal efficiency and includes features such as a heat recovery system and a rooftop hydroponic greenhouse. The facility achieved a remarkably low average annual design PUE of 1.23, reflecting our efficiency investments.
Green roof at PA10 Paris IBX data center
Energy efficiency
In addition to designing new green buildings, we look for opportunities to improve efficiency in our operational facilities. We systematically measure PUE in our data centers, using it to monitor power usage trends and assess the impact of design and operational decisions on individual facilities over time.
We used green bonds to finance a holistic assessment and replacement of the power and cooling systems in our Equinix BG1 data center in Bogotá. We replaced the computer room air conditioners (CRACs) with higher-density units that provide more cooling capacity while consuming less energy.
Not only can the data center now support more customers on the same footprint, but it doesn’t have to draw more power to do so. The project drove an average annual PUE reduction of 19%. It also helped reduce carbon impact, avoiding 239 metric tons of carbon dioxide equivalent (mtCO2e) annually.
Power and cooling system inside BG1 Bogotá IBX data center
Renewable energy
Increasing renewable energy coverage is an essential aspect of our decarbonization strategy. Our focus is on procuring renewable energy from sources that significantly enhance the sustainability of local power grids. Across a number of the markets we operate in, we’ve partnered with developers to increase the renewable energy supply to the grid. We do this via PPAs, where we provide developers long-term financial support to facilitate utility-scale renewable energy projects. This support reduces risk for developers, thus making renewable energy projects financially viable in more places.
Equinix has used green bonds to finance two of these PPAs, including one at Rush Springs Wind Farm in Oklahoma. This PPA supports a large-scale renewable energy project in an area where the grid has historically been powered by fossil fuels. Relative to the grid in the region, the project drives an average annual emissions avoidance of 218,643 mtCO2e.
What are the responsibilities of green bond issuers?
The benefits of green bonds are clear, but there are many responsibilities companies must fulfill in order to issue them. Issuers like Equinix must track the use and management of their proceeds, and report on them regularly. They also need to report the details of how they evaluate and select projects for funding. This transparency helps investors verify that their funding is being used responsibly.
To help meet these responsibilities, Equinix developed a Green Finance Framework. This Framework is a set of guidelines that promote transparency and integrity in green debt disclosures. Through it, we aim to increase our focus on protecting the environment and addressing global climate change through greenhouse gas emissions reductions, increasing resource efficiency and driving corporate transparency and accountability.
Continuing our commitment to innovation and transparency
We may use proceeds from future green bonds to support other sustainability commitments, including sustainable water and wastewater management.
We will continue to prepare annual green bond allocation reports detailing the use of proceeds from our green bonds, and the positive impact of any projects financed, until we have fully allocated the proceeds. View our historical green bond allocation reports to learn more about how we use green bond proceeds.
Also, access our interactive sustainability report for more details about how green finance fits within the context of our sustainability strategy.
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