SUSTAINABLE FINANCING

Our approach to sustainable financing enables us to maximize our positive impact by publicly aligning our finance strategy with the achievement of our environmental and social ambitions, while contributing to the United Nations Sustainable Development Goals. We have leveraged our investments with financial instruments that allow us to direct our resources appropriately to mitigate risk, increase positive impact, and align incentives within the company with our ESG objectives.

Green Bond Progress Report
Aligned with this approach and our sustainability strategy, we issued our first-ever green bond in September 2020, valued at US$705 million, at the time the largest for a Latin American corporation and a first for the Coca-Cola System.

As of December 31, 2022, we had allocated US$664.87 million of green bond net proceeds to finance or refinance eligible green projects in three main categories—circular economy, water stewardship and climate action—according to our →Green Bond Framework. This total investment represented 94% of the net proceeds, leaving US$40.13 million of net proceeds unallocated at the end of 2022.

While eligible projects within the three categories focused on a variety of solutions, they shared the common objective of advancing our company’s mission to simultaneously create economic and social value while generating environmental wellbeing across our value chain in collaboration with all of our stakeholders.

Green Bond Allocation
As of December 31, 2022, Coca-Cola FEMSA had allocated US$664.87 million of green bond net proceeds to projects supporting circular economy, water stewardship, and climate action.

US$705 Million
Green Bond

Issued September 2020
US$664.87 million allocated
Between 2018-2022

Circular
Economy
72%
US$479.12
million

Water
Stewardship
3%
US$20.67
million

Climate
Action
25%
US$165.07
million

Goal Performance

The net proceeds of our green bond help to deliver on our company’s sustainability goals, including our commitments to increase recycled content in our PET packaging, improve water efficiency, and reduce CO2e emissions. From 2018 through 2022, we made progress against these goals, as illustrated in these charts.

Use at least 50% recycled resin (rPET) in our PET bottles by 2030.

Achieve a water use ratio of 1.26 liters of water per liter of beverage produced by 2026.

In 2020, we became the first Mexican company and the third in Latin America to achieve the official approval of our emissions reduction targets by the Science Based Target initiative (SBTi), aligned with the goal of the 2015 Paris Agreement to limit global warming to well below 2°C above preindustrial levels. In 2020 KOF commited to use 100% of renewable energy in manufacturing and distributiuon operations by 2030. Pursuant to this public commitment, we made great progress during 2022 by increasing our renewable energy usage from 53% to 66%.

Sustainability-Linked Bonds

Building on our sustainability strategy, in September 2021, we issued the first-ever sustainability-linked bonds (SLB) in the Mexican market for a total of Ps. 9,400 million in accordance with our →Sustainability-Linked Bonds Framework.

Recognizing that water is not only an invaluable resource for our company and industry, but also an indispensable element of climate change resilience, we are focusing this first issuance on the sustainable and efficient use of water, aligned with our commitment to water stewardship. Unlike the use of green bond proceeds, our sustainability-linked bonds are committed to the achievement of a water use ratio of 1.26 by 2026. Today, our water use ratio is 1.46 liters, a benchmark of water efficiency for the Coca-Cola System.

Social & Sustainability Bonds

Consistent with our financial discipline, strong credit profile, and commitment to sustainability, we issued social and sustainability bonds in the Mexican market for a total of Ps. 6,000 million in October 2022—becoming the first non-financial corporation in the Americas and the first company in the Coca-Cola System to issue social bonds. We also became the first company in Mexico’s consumer sector to issue sustainability bonds.

This transaction was completed in two tranches: The first social tranche was priced at a fixed rate of 9.95% (Mbono+0.30%) for an amount of Ps. 5,500 million due in seven years; and the second sustainability tranche was priced at a variable rate of TIIE + 0.05% for an amount of Ps. 500 million due in four years.

The net proceeds from these bonds will be used to finance eligible social and sustainability projects focused on the social and economic development of our communities in accordance with our →Sustainability Bonds Framework. Specifically, the goal of this latest issuance is to support underrepresented and traditionally excluded social groups in our communities with programs that provide entrepreneurial and self-employment skills, financial solutions that support store owners, and investments in sustainable community development, including water replenishment and water access projects.

Subject to the issuance of applicable funding instruments, we will continue to annually report on the allocation of proceeds and the associated impact in the year(s) following issuance of any future funding instruments under our current Green Bond and Sustainability-Linked Bonds Frameworks.