Enel to bet on SDG-linked bonds, ditch green bond sales

Italian energy group Enel SpA (BIT:ENEL) plans to stop its green bond programme and replace it with a new format that will link bond issuance to the UN Sustainable Development Goals (SDGs), the International Financing Review (IFR) said on Friday.

The Italian electricity major, which is one of the largest corporate issuers of green bonds, has confirmed it intends to place an EUR-denominated SDG bond in Europe, where it has been in talks with investors during the past few weeks. The move follows the company’s USD-1.5-billion sale of (EUR 1.4bn) SDG-linked bonds last month in a transaction that attracted roughly USD 4 billion in orders.

The European offering will take place in the next few weeks. Under the terms of SDG-linked deals, Enel will be free to spend the raised funds at its own discretion, even for coal-powered electricity generation, the IFR says.

According to the IFR, Enel’s plan for this “controversial new bond format” poses uncertainty on the green bond market as a whole, with some green investors pointing out that the new format contradicts fundamental principles related to accountability and transparency on reporting standards. Bankers, meanwhile, claim that the format could become a new industry standard and many companies will follow Enel’s example.

Enel raised a total of EUR 3.5 billion (USD 3.8bn) from issuing green bonds since adopting that format in 2017. It has told the IFR, however, that the new approach better fits its wider strategy as the SDG-linked bonds are directly tied to its commitment to lift its renewables base by 25% by end-2021 and boost the renewables share in its installed capacity to 55% by same year from 48% now.

(USD 1.0 = EUR 0.911)

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