‘World’s largest’ sustainability-linked bond issue from Enel three times oversubscribed

Pictured: The Talinay wind park in Chile. Image: Enel

The bond is linked to the delivery of Enel’s climate targets; the business has committed to reduce Scope 1 (direct) greenhouse gas emissions by 80% by 2030, against a 2017 baseline. There is also a target to reduce emissions intensity from Scope 1 sources below 148g of CO2e per kWh by 2023. In the longer-term, Enel is striving for net-zero by 2050.

The Science-Based Targets initiative (SBTi) has approved these targets in line with the Paris Agreement’s 1.5C trajectory and Enel claims they are aligned with UN Sustainable Development Goal (SDG) 13: Climate Action.

In a statement issued by BNP Paribas, which acted as joint book runner on the deal, it was revealed that the bond’s interest rate could increase by up to 25% if Enel did not deliver its promised reductions in Scope 1 emissions. A third party will need to assess the firm’s greenhouse gas accounting and reporting methodologies to verify progress.

Other joint book runners on the deal were Barclays, Bank of America, Citigroup, Credit Agricole, Credit Suisse, Goldman Sachs, HSBC, J.P. Morgan, Mizuho, Morgan Stanley, Société Générale and SMBC Nikko.

The BNP Paribas statement stipulates that the bond is the largest of its kind to have been issued to date in the fixed-capital markets. It was offered in the US and international markets. The issue follows a previous $3.95bn sustainability-linked bond from Enel, sold last June.

“In the coming years we will see a strong acceleration of SDG-aligned investments, which will represent a key lever in creating long-term sustainable value for everyone”, Enel’s chief financial officer Alberto De Paoli said.

“We are firmly convinced that sustainability-linked finance will drive the enhancement of sustainable capital markets in the upcoming years, placing SDG-linked targets and financial value at the core of its structure, progressively replacing conventional debt”.

Bonds boon

Enel is the latest corporation to ringfence funds through dedicated bonds and loans tied to environmental performance.

Earlier this month, the world’s largest protein producer, JBS, announced the issuance of a $1bn sustainability-linked bond tied to net-zero targets, while technology firm HP has unveiled its sustainable bonds framework.

Screwfix and B&Q’s parent firm Kingfisher similarly signed for a £550m revolving credit facility agreement (RCF) with interest rates linked to environmental and community targets. Building materials and design giant Kingspan also signed for a new €700m revolving credit facility with interest rates linked to environmental targets. Kingspan’s KPIs specifically relate to reducing emissions, promoting the circular economy and water stewardship.

Sustainability-linked loans are becoming increasingly commonplace, along with the boom in corporate green bond issuance. Additional announcements in 2021 come from the likes of AB InBevThai Union and Tesco, which is now also supporting suppliers to follow suit.

Sovereign green bonds are also becoming increasingly common as nations strive to deliver an economic recovery from Covid-19 that is aligned with international climate targets. Following issuance from the likes of Germany and Sweden, the UK Government has this month outlined plans to issue £15bn of green gilts. They will be used to support climate adaptation and decarbonisation in high-emitting sectors including power, transport and the built environment.

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Sarah George

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