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Apple Inc.: The Second Green Bond
Lipson, Marc L.; O'Brien, Robby Case F-2022 / Published January 6, 2023 / 15 pages. Collection: Darden School of Business
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Product Overview

Lisa Jackson, vice president of Environment, Policy and Social Initiatives at Apple Inc. (Apple) and, previously, the first African American administrator of the Environmental Protection Agency, was preparing for questions that might arise in relation to Apple’s upcoming 10-year $1 billion green bond issue, Apple’s second such offering. The case explores the economics of bond pricing in general, and green bonds in particular, by describing the results of the first issue, focusing on possible reactions to the second issue, and surfacing concerns that arise in connection with green bond markets. The possible positive impact on the environment from green bond issues is contrasted to concerns about greenwashing and the stark reality that Apple’s first green bond exhibited at best a very small reduction in yields relative to comparable conventional bonds (a very small so-called greenium). The case provides a basis for discussion of green bond markets and enough information to estimate a yield for the new bond. Case data allow a yield estimate based on the yield curve of Apple’s outstanding issues, bonds of comparable firms, and Apple’s bond rating. All comparable yields are provided so the case discussion can focus on the underlying drivers of yields: a baseline risk-free rate that can vary by time to maturity, an added risk premium, and adjustments based on other characteristics that might affect supply and demand. While not central to the case, sufficient information is provided to critically evaluate Apple’s bond rating at the time and comment on Apple’s growing use of debt financing. This case has been used successfully to generate a discussion of green bond markets in an elective course and as an introduction to bond pricing in a core finance class. It has also been used successfully in an Executive Education program to explore the advantages and disadvantages to a firm of employing green bonds in financing investments.



Learning Objectives

The case is designed to achieve the following learning objectives: (1) Introduce students to the underlying economics of bond yields with an emphasis on the yield curve, the credit spread, and supply and demand drivers in general. (2) Establish basic methods for estimating yields on new bond issues: bond ratings combined with market data, bonds of comparable companies, or outstanding bonds of the issuing company. (3) Explore the positive and negative aspects of green bond markets with an emphasis on the underlying economic hypothesis that drives anticipated beneficial impacts: heightened demand could lower the yield on the bond issue and thereby incentivize investments. The case highlights the actions needed by both firms that issue bonds and those that promote such markets to ensure the markets’ growth and success. (4) Understand the drivers of bond ratings and standard measures of debt capacity. This case is intended to spark discussion and interest in the underlying drivers of supply and demand for bonds rather than simply present an exercise in bond pricing. The green bond market is an excellent context for such discussions—one that also explores how capital markets, and debt markets in particular, can play a role in achieving policy goals in the absence of explicit government subsidies.


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  • Overview

    Lisa Jackson, vice president of Environment, Policy and Social Initiatives at Apple Inc. (Apple) and, previously, the first African American administrator of the Environmental Protection Agency, was preparing for questions that might arise in relation to Apple’s upcoming 10-year $1 billion green bond issue, Apple’s second such offering. The case explores the economics of bond pricing in general, and green bonds in particular, by describing the results of the first issue, focusing on possible reactions to the second issue, and surfacing concerns that arise in connection with green bond markets. The possible positive impact on the environment from green bond issues is contrasted to concerns about greenwashing and the stark reality that Apple’s first green bond exhibited at best a very small reduction in yields relative to comparable conventional bonds (a very small so-called greenium). The case provides a basis for discussion of green bond markets and enough information to estimate a yield for the new bond. Case data allow a yield estimate based on the yield curve of Apple’s outstanding issues, bonds of comparable firms, and Apple’s bond rating. All comparable yields are provided so the case discussion can focus on the underlying drivers of yields: a baseline risk-free rate that can vary by time to maturity, an added risk premium, and adjustments based on other characteristics that might affect supply and demand. While not central to the case, sufficient information is provided to critically evaluate Apple’s bond rating at the time and comment on Apple’s growing use of debt financing. This case has been used successfully to generate a discussion of green bond markets in an elective course and as an introduction to bond pricing in a core finance class. It has also been used successfully in an Executive Education program to explore the advantages and disadvantages to a firm of employing green bonds in financing investments.

  • Learning Objectives

    Learning Objectives

    The case is designed to achieve the following learning objectives: (1) Introduce students to the underlying economics of bond yields with an emphasis on the yield curve, the credit spread, and supply and demand drivers in general. (2) Establish basic methods for estimating yields on new bond issues: bond ratings combined with market data, bonds of comparable companies, or outstanding bonds of the issuing company. (3) Explore the positive and negative aspects of green bond markets with an emphasis on the underlying economic hypothesis that drives anticipated beneficial impacts: heightened demand could lower the yield on the bond issue and thereby incentivize investments. The case highlights the actions needed by both firms that issue bonds and those that promote such markets to ensure the markets’ growth and success. (4) Understand the drivers of bond ratings and standard measures of debt capacity. This case is intended to spark discussion and interest in the underlying drivers of supply and demand for bonds rather than simply present an exercise in bond pricing. The green bond market is an excellent context for such discussions—one that also explores how capital markets, and debt markets in particular, can play a role in achieving policy goals in the absence of explicit government subsidies.