Enel raises coupons on $11 billion ESG bonds after missing emissions targets
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Enel SpA will increase the interest payments on its sustainability-linked bonds following a penalty triggered by its failure to meet greenhouse gas emissions targets in 2023.
This setback translates to approximately €83 million ($89 million) in additional interest across Enel bonds valued at around $11 billion, as estimated by Bloomberg Intelligence. This penalty marks the largest repercussion yet in a market where Enel pioneered issuance in 2019.
It highlights the impact of the ongoing energy crisis, exacerbated by Russia’s invasion of Ukraine, on companies’ efforts to uphold climate commitments. Greece’s Public Power Corp. is another SLB issuer affected, having already missed a similar target.
Also read: New study reveals 80% of sustainable bonds fail to meet global climate goals
“Due to the unprecedented crisis faced by the European energy system in 2022 and 2023, the group’s emission reductions in 2023 were not sufficient,” Enel said.
“Despite these unprecedented circumstances, the group’s emissions intensity in 2023 remained in line with the 1.5C trajectory” that Enel has committed to, it said.
The sustainability-linked bond (SLB) market is relatively new, and investors are still learning how these instruments react to challenges. Anticipations of an issuer falling short of targets can significantly impact bond prices, a scenario Enel experienced firsthand last year.
In a notice to investors on Tuesday, Enel announced that interest payments on five bonds totalling €5.75 billion will increase by 25 basis points.
The current coupon rates range from zero to 0.5%. As Enel’s 2023 sustainability report detailed, this adjustment also affects US-dollar-denominated notes valued at $4.75 billion.
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