Bond Structure

● Size: $1.0 billion

● Tenor: 10 years (maturing in 2027)
● Type: Fixed-rate, US dollar-denominated green bond
This structure is appropriate for the following reasons:
1. The size is smaller than Apple's first green bond ($1.5 billion), allowing for more
focused use of proceeds and potentially easier allocation to specific
environmental projects.
2. The 10-year tenor aligns with long-term environmental initiatives and matches a
common benchmark, facilitating comparisons and liquidity.
3. The fixed-rate structure provides certainty for both Apple and investors.

Pricing Strategy
To determine the appropriate pricing for Apple's new green bond, we need to consider
several factors:
1. Yield curve for US Treasury bonds
2. Apple's credit rating (AA+) and recent financial performance
3. Yields on comparable corporate bonds
4. Potential for a "greenium"

Benchmark Yield
As of June 6, 2017, the 10-year US Treasury yield was 2.21%. This serves as the risk-free
benchmark.

Credit Spread
Apple's AA+ rating suggests a credit spread slightly wider than AA-rated bonds but
narrower than A-rated bonds. The 10-year AA-rated IT corporate bond yield was 3.20%,
implying a spread of 99 basis points over the Treasury yield.

Comparable Bond Yields

Apple's conventional 2.400% bond maturing May 3, 2023, had a yield of 2.398% as of
June 6, 2017. Adjusting for the longer tenor of the new issue, we'd expect a slightly
higher yield.

Potential Greenium
Apple's first green bond showed a slight spread of 2.8 to 5.1 basis points compared to
conventional bonds. We can aim for a similar or slightly larger greenium for this issue.

Proposed Pricing
Based on these factors, I recommend targeting a yield between 3.10% and 3.15% for the
new green bond. This implies a spread of 89-94 basis points over the 10-year Treasury,
which is:
1. Slightly tighter than the AA-rated IT corporate bond spread (99 bps)
2. About 5-10 bps lower than what we might expect for a conventional Apple bond,
representing the greenium
To illustrate this pricing strategy:

Component Yield/Spread

10-year Treasury yield 2.21%

Credit spread 89-94 bps

Target yield 3.10-3.15%

Implied greenium 5-10 bps

This pricing strategy balances several objectives:

1. It offers a yield attractive to investors while capturing a small greenium.
2. It's consistent with Apple's strong credit rating and recent financial performance.
3. It positions the bond competitively within the green bond market, potentially
driving future demand.

Coupon Rate
Given the target yield of 3.10-3.15%, I recommend setting the coupon rate at 3.125%.
This allows for a slight premium to par at issuance, which is often preferred by
investors.
By implementing this detailed bond structure and pricing strategy, Apple can position its
second green bond for success, potentially driving growth in the broader green bond
market while advancing its environmental initiatives.

Use of Proceeds (Not so reliable)

Renewable Energy Projects (60% allocation)

● Focus: Solar, wind, and associated energy storage solutions
● Rationale:
1. Aligns with Apple's commitment to reduce climate change impact, one of
its three key environmental priorities
2. Supports Apple's goal of 100% renewable energy for all facilities
3. Addresses the largest portion (77%) of Apple's carbon footprint from
manufacturing
4. Builds on the success of previous investments, such as the rooftop solar
installation at Apple Park
●

Closed-Loop Supply Chain Initiatives (30% allocation)

● Focus: Recycling, material recovery, and sourcing recycled components
● Rationale:
1. Directly supports Apple's innovative goal of creating a closed-loop supply
chain
2. Addresses resource conservation, another of Apple's three key
environmental priorities
3. Differentiates Apple's green bond by focusing on circular economy
principles
4. Builds on the success of existing programs, such as Apple's device
recycling initiatives
●

Research into Environmentally Safer Materials (10%

allocation)
● Focus: Development of bio-based and recyclable materials
● Rationale:
1. Aligns with Apple's third key environmental priority: pioneering safer
materials in products and processes
2. Demonstrates Apple's commitment to innovation in sustainability
3. Has potential for significant long-term environmental impact through
industry-wide adoption
 4. Supports Apple's goal of eventually stopping mining activities altogether

Marketing positioning strategy

Emphasize Environmental Leadership

Strategy:
1. Highlight Apple's comprehensive approach to sustainability across its entire
value chain
2. Showcase the success of the first green bond, including specific projects funded
3. Emphasize Apple's ambitious goal of carbon neutrality by 2030

Rationale:
● Demonstrates Apple's long-term commitment to environmental responsibility
● Builds credibility by showing tangible results from previous green bond
● Aligns with growing investor focus on companies with clear sustainability goals

Address Greenwashing Concerns

Strategy:
1. Clearly communicate the additionality of green bond-funded projects
2. Provide concrete examples of environmental impact from the first green bond
3. Highlight third-party verification of the green bond framework by Sustainalytics

Rationale:
● Proactively addresses a key concern in the green bond market
● Builds trust with investors by demonstrating transparency
● Enhances credibility through independent validation

Engage with ESG-Focused Investors

Strategy:
1. Conduct targeted outreach to investors with environmental mandates
2. Emphasize the potential for the green bond market to grow
 3. Position Apple's green bond as a high-quality, liquid investment in the ESG space

Rationale:
● Taps into growing demand for sustainable investments
● Aligns with increasing regulatory pressure for ESG considerations
● Leverages Apple's strong brand and financial position in the ESG market

Highlight Financial Benefits

Strategy:
1. Emphasize potential for investor diversification
2. Discuss the possibility of capturing a small greenium
3. Highlight the bond's inclusion in green bond indices

Rationale:
● Attracts investors looking for both financial returns and environmental impact
● Addresses investor interest in potential pricing advantages
● Increases visibility and liquidity of the bond

Showcase Innovative Projects

Strategy:
1. Detail specific projects to be funded, such as renewable energy and closed-loop
supply chain initiatives
2. Emphasize Apple's leadership in developing new environmental technologies
3. Highlight the potential industry-wide impact of Apple's green initiatives

Rationale:
● Provides concrete examples of how bond proceeds will be used
● Differentiates Apple's green bond from competitors
● Demonstrates the broader impact of investing in Apple's green bond

Implement Transparent Reporting

Strategy:
1. Commit to annual green bond impact reports
2. Provide detailed breakdowns of project allocations and environmental outcomes
 3. Utilize clear metrics for measuring environmental impact

Rationale:
● Builds trust with investors through ongoing transparency
● Allows investors to track the real-world impact of their investment
● Sets a high standard for reporting in the green bond market
By implementing this comprehensive marketing positioning strategy, Apple can
effectively communicate the value of its second green bond issuance to investors,
address potential concerns, and position itself as a leader in corporate environmental
responsibility. This approach leverages Apple's strong brand, financial position, and
environmental commitments to attract a diverse range of investors and potentially
capture pricing advantages in the growing green bond market.