Green Bonds Support Union Pacific's Sustainability Efforts

By Mike Miller, Vice President & Treasurer-Finance

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Here’s some financial news that should interest every railroader: Union Pacific just issued a successful $600 million inaugural "green bond."

What’s a green bond? Well, just like any other corporate or government bond, they’re an investment offering used to raise money, but the difference is green bond proceeds are earmarked for climate and environmental projects.

The first green bonds were issued in 2008 by the World Bank. Since then, the World Bank has issued more than $14 billion in green bonds, with funds going toward 111 projects around the world in the areas of renewable energy, clean transportation, and agriculture and land use, including financing the Rampur Hydropower Project in northern India.

Companies use green bonds to raise funds for their own sustainability efforts, and Union Pacific is now among them. By linking our financing activity to our sustainability strategy, we can fund our most promising projects that will help to decarbonize our footprint and meet our sustainability goals.

And those goals are aggressive.

Union Pacific has committed to reduce its absolute Scope 1 and Scope 2 GHG emissions, and GHG emissions on a well-to-wheel basis from locomotive operations 26% by 2030 from a 2018 baseline, with a long-term goal of achieving Net Zero emissions by 2050.

Our Green Financing Framework allows us to issue green bonds to raise money in the marketplace. It outlines eligible green projects, how we’ll evaluate and select those projects, and how proceeds are spent. We expect a significant portion of any green bond proceeds to go toward our Clean Transportation category, which includes upgrades to existing rolling stock, contributions to modal shift and expanding network capacity.

These projects could include, but are not limited to:

• New battery-electric locomotives,
• Locomotive modernizations that reduce GHG emissions and increase fuel efficiency,
• Expansion of intermodal facilities, which can promote modal shift of freight to lower-carbon alternatives such as rail,
• New sidings and siding extensions, which increase train length and reduce dwell time, and
• Investment in and/or development of onsite or offsite generation and distribution of renewable energy from solar or wind sources.

We intend to fully allocate green bond proceeds within 36 months of any issuance.

Companies get outside opinions of their green financing frameworks to assure investors that their projects are aligned with the “Green Bond Principles” defined by the International Capital Markets Association (ICMA) and will positively impact the environment. For our outside opinion, we engaged a company called Sustainalytics -- a global leader in sustainability ratings – who gave our framework a favorable opinion.

There’s no question that green bonds’ popularity is being driven by investors becoming more focused on Environmental, Social and Governance (ESG) initiatives. These bonds provide a new option for investing in decarbonization of the planet; while companies offering them are attracting new investors who are interested in their sustainability story.

Investor interest in our green bond offering was high and represented a strong vote of confidence in support of our sustainability efforts as we continue to recognize our role in reducing climate impacts when and where we can.

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