Green Finance Innovation: Enel Signs €1 Billion Sustainability-Linked Loan Facility
Electricity company Enel announced today that it has signed a €1 billion Sustainability-Linked Loan facility. The deal follows Enel’s recent publication of its Sustainability-Linked Financing Framework, one of the first of its kind that fully integrates sustainability into the company’s global funding program, by covering multiple funding solutions, including commercial papers, loans and bonds.
Sustainability-linked loans and bonds are growing in popularity as instruments of choice for issuers interested in sustainable finance. As opposed to traditional green or social bonds, which are used to fund specific projects, sustainability-linked financing can be used for broader purposes, with the terms of the financing tied to the issuer’s overall sustainability profile. For investors, this also helps avoid the problem of potentially investing in the “green” financial projects of a company that otherwise would not meet their sustainability preferences.
According to the new framework, the interest rate Enel will pay on the loan facility will be linked to the company’s achievement of 2 Key Performance Indicators (KPIs), and associated Sustainability Performance Targets (SPTs), related to emissions and renewable installed capacity. Specifically, the framework links the loan to Enel’s targets of a70% reduction of direct GHG emissions per kWh by 2030, and 55% of renewable installed capacity by 2021, and 60% by 2022, compared with 2019 levels.
ESG assessment, research and analytics company Vigeo Eiris provided the Second Party Opinion (SPO) for the new framework. Benjamin Cliquet, Head of Sustainable Finance Services at Vigeo Eiris, said:
“SLBs provide a new mechanism for investors and corporates to align on sustainability and financing objectives. The growth of these new instruments is absolutely vital for advancing the sustainability agenda as they help to build and diversify the array of tools on hand to both corporates and financial actors. We’re proud to have supported Enel on this pioneering mission.”
Enel stated that the loan is in line with its financial strategy, which aims to achieve a share of sustainable finance sources on total gross debt equal to 43% in 2022 and 77% in 2030.