Benzinga | Aug 27, 2021 07:52AM EDT

Philip Morris Int'l. Highlights Changes To Its Financing Framework To Allow For Co.'s Smoke-Free Transformation Into Financing Strategy

Philip Morris International Inc. (PMI) (NYSE:PM) today published its business transformation-linked financing framework ("Framework"), which integrates the company's smoke-free transformation into its financing strategy.

"To strengthen our commitment and further highlight to stakeholders the seriousness of our smoke-free ambitions, we wish to link our most material sustainability priorities to our financing," said Emmanuel Babeau, Chief Financial Officer. "We believe that a business transformation-linked financing framework not only helps reinforce our commitment to reinvent our company, but will also allow investors and lenders to engage with and support our industry-leading transformation as we work to accelerate the end of smoking and use our strong capabilities to develop products that go beyond nicotine and have a net positive impact on society."

The Framework outlines the guidelines that PMI will follow in issuing business transformation-linked financing instruments in the debt capital and loan markets, which may include public notes offerings, private placements, loans, and other relevant financing instruments.

The Key Performance Indicators (KPIs) selected for the Framework directly measure and respond to the focus of PMI's sustainability and corporate strategy, and the company's most material1 sustainability topic: addressing the health impact of its products. The chosen KPIs are directly linked to two of PMI's most ambitious and strategic Business Transformation Metrics:

2 PMI's smoke-free/total net revenue percentage, measuring the scale of the company's business transformation in regularly reported financial terms and reflecting the publicly announced benchmark by which it aims to become a predominantly smoke-free company.

4 Number of markets where PMI smoke-free products are available for sale, measuring the access provided to adult smokers around the world, which serves as a key indicator of the company's commitment to drive the obsolescence of cigarettes as fast as possible in as many markets as possible.

The selected KPIs are key elements for demonstrating PMI's progress towards a smoke-free future, as well as its leading position versus the other global industry players, both in actual performance as well as ambitions for 2025 and beyond. The two KPIs serve as an integral part of PMI's broader 2025 aspirations included in its Integrated Report 2020, as well as verifiable and regularly reported metrics that provide external stakeholders visibility on how the company achieves its goals.

The Framework includes two Sustainability Performance Targets (SPTs), with an observation date of December 31, 2025:

2 Increase PMI's full-year 2025 smoke-free/total net revenue percentage to more than 50%, from the 2020 baseline of 23.8%.

4 Increase the number of markets where PMI's smoke-free products are available for sale to 100 markets by the end of 2025, from the baseline of 64 markets on December 31, 2020.

These ambitious SPTs reflect PMI's determination to become a predominantly smoke-free company within the next five years and significantly increase the access of its smoke-free products to a greater number of adult smokers across a broad range of markets. The SPTs further demonstrate the company's commitment to deliver on its purpose and drive the end of cigarette smoking as fast as possible, with the ultimate objective to significantly improve public health.

The Framework was validated by S&P Global Ratings, which provided a second party opinion (SPO). The SPO recognized the chosen KPIs and related SPTs as material, measurable, ambitious, regularly reported and externally verified--in line with the June 2020 Sustainability-Linked Bond Principles administered by the International Capital Market Association (ICMA), and the May 2021 Sustainability-Linked Loan Principles administered by the Loan Market Association (LMA). The SPO is also available on the PMI website.

"The transformation of our company is intrinsically linked to our sustainability and corporate strategy," said Jennifer Motles, Chief Sustainability Officer. "As our most material issue comes from the impact created by the products we sell, only a radical transformation can successfully contribute to a more sustainable world. We are therefore very pleased to publish our business transformation-linked financing framework, which serves as a further step in achieving our purpose."

"The Framework builds on our genuine commitment to transform," she continued, "reflecting: a Statement of Purpose issued by the Board of Directors; concrete KPIs for reporting and compensating executives on that purpose (Business Transformation Metrics); business transformation-linked financing instruments tied to targets for select KPIs; and transparent, periodic disclosures on our progress through integrated reporting. I hope this can serve to inspire something bigger within our industry and set an example for other industries also undergoing transformations."

PMI is differentiated from other global tobacco companies by its purpose, by its unique value proposition, by the commitment to, pace of and scale of its transformation, by the magnitude of its resource allocations and by the quality of its disclosure. To date, PMI is the only tobacco company within the traditional international tobacco industry that is purposefully working to phase out cigarettes completely and actively engaging with stakeholders to do so. It is also the only company in the industry that has publicly disclosed ambitious forward-looking targets for relevant metrics, including the two selected KPIs. In May of this year, S&P Global Ratings' ESG Evaluation Report recognized PMI's business transformation as an industry differentiator.