We analyse the structure, assess its ambition level and price the option value of the associated Sustainability Performance Targets (SPT). Overall, there is much to commend this bond from a sustainability perspective. There is limited comparable issuance, so this SLB could establish an encouraging trend in supporting emissions reduction in the transport sector.
We offer the following conclusions:
- The structure offers strong sustainability targets - material Key Performance Indicators (KPIs) combined with ambitious SPTs. This is encouraging to see in the transport sector, where highly rated issuance has been low.
- The bond is insufficiently material. A distant observation date means it does not achieve our threshold for a material instrument (a “Greenback SLB”).
- The ambitious SPTs translate into an option valued at 4.5bp (around 10% of spread). A wide trading level means this bond offers the chance to support an ambitious transition in a high-emitting transport issuer.