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Thursday, December 2, 2021

After the US Securities and Exchange Commission objected, Allbirds abandoned its “sustainable” claim from the IPO

According to the group’s chief financial officer, Allbirds, a sports shoe brand listed on the Nasdaq last week, abandoned its first “sustainable” IPO after the US Securities and Exchange Commission raised objections.

The San Francisco-based company’s plan is an example of the recent trend of companies emphasizing their ethical qualifications before going public. But the move by the US Securities and Exchange Commission highlights the growing concern of regulators on how companies report climate and sustainability-related issues.

Allbirds announced in August that it would seek a “sustainable public equity offering” to ensure that the company meets various environmental, sustainability and governance standards. However, it has repeatedly weakened these proposals in subsequent updates of its IPO prospectus.

In September, it deleted the reference to sustainable “products” and stated that it would follow the framework of “sustainable principles and goals”. In October, it deleted half of the references to the new framework, including suggestions that it might increase IPO costs and that other companies could follow its “sustainable” approach.

Allbirds chief financial officer Mike Bufano (Mike Bufano) said that the company’s commitment to sustainable development still exists, but said it has been pushed by regulators to change its prospectus. He declined to give details.

“A lot of things will change because you get feedback from different stakeholders, in this case the SEC, but… we believe [the framework] It is still very useful for other companies,” Bufano said.

The US Securities and Exchange Commission declined to comment. The agency renewed its focus on the disclosure and naming of climate change this year. In March, it asked the public to comment on the disclosure rules, “focusing on promoting the disclosure of consistent, comparable and reliable climate change information.”

SEC Chairman Gary Gensler said at a congressional hearing last month that the agency is also paying attention to the labeling of investment funds to ensure that there is sufficient “rigor” behind the sustainability statement.

After the reforms announced last Wednesday, US companies will also find it more difficult to block climate change and human rights petitions in the annual shareholder vote. The abolition of shareholder measures passed during the Trump administration is a victory for environmentalists and other socially conscious investors who have proposed resolutions to push companies to reform their business practices.

Bufano of Allbirds said that the existing ESG rating system “is great, but is biased towards companies with a long track record.”

The company has made environmental protection a key part of its wool and eucalyptus footwear brands. It stated that the carbon impact of each pair is 30% lower than that of its competitors, although it has been criticized by some activists for the way it calculates emissions.

The company’s initial public offering this week is the latest in a series of successful listings of consumer-centric brands. Due to strong investor demand, Allbirds sold more shares than planned, and the stock was up 93% from the issue price on the first day of trading on Wednesday.

Bufano said that the recent improvement in the gross margin of the loss-making company has encouraged investors, and he said it shows that the company is “really focused on profitable growth.”

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