Pricing a four-tranche $4.5bn debt deal, this was the first time the company had issued non-labelled senior debt, rather than an SLB, since 2018. The question for sustainable debt market watchers is, is this a step forward…or back?
At the Anthropocene Fixed Income Institute, our research has shown that adding sustainability-linked features to debt products strengthens accountability and transparency for transition. Through the step-up option, which provides a hedge for investors, the market can rationally price primary issuance at tighter levels, which rewards ambitious issuers.[1]
So, what does it mean for the SLB market to see its founder revert to conventional bonds? Does this signal a lack of confidence in this structure, or has it done its job, and supported Enel’s transition into a sustainable company?
SLBs still carry weight
Since Enel’s first issuance in the format in October 2019, SLBs rose to 63% of the utility’s total bond debt, as shown in Figure 1.
Enel has 33 SLBs outstanding, totalling over $31.6bn. It has updated its financing framework several times, adding new KPIs and targets. A summary of its targets, and the notional outstanding referencing each target can be seen in Table 1.
Just because Enel has reverted to conventional debt, the existing SLBs do not go away. They still require Enel to account for its performance, with $16.3bn referencing future targets, including $3.6bn in debt linked to its commitment to achieve zero emissions by 2040.
While our research on the financial value to both issuers and investors of such performance linkages shows that in principle all debt can benefit from these features, we do acknowledge the financial risks that issuers take by connecting interest payments to sustainability outcomes. Indeed, Enel missed its 2023 emissions intensity target, leading to a coupon step-up on ten bonds.[2]
It may be issuers need to optimise the right mix of SLBs within their capital structure, balancing the potential cost-of-capital benefits of ambitious SLB issuance with possible step-up coupons.
Transition outcomes
In the company’s statement on its latest issuance, it reports on the significant change in its energy mix; an increase in zero-emissions power generation from 45% (2015) to 83% (2024).[3]
“These results were also possible thanks to the use of sustainable finance instruments, in particular Sustainability-Linked ones, which therefore achieved the objective for which they were introduced”.
The company certainly believes that its issuance of SLBs has helped to accelerate its transition and, as that debt remains outstanding, the transparency that SLBs create mean that investors can continue to influence its progress.
It is a good day where SLBs are credited with supporting the decarbonisation of one of Europe’s largest utilities, and the existing bonds will continue to do so until all targets are observed in 2040.
[1] For our award-winning publication on the product, please see "Sustainability-Linked Bond Handbook", AFII, 12 May 2024.
[2] "Enel issues the largest placement by a European utility in 2025", Enel, 24 Sep 2025.
[3] "Enel SLBs: fortes fortuna juvat", AFII, 26 Apr 2024.
