Nobian SLB: a lot of hot air?

7 minute read

Nobian (ticker NOHOLB), a privately-owned European chemical company, has released its 2022 sustainability report. Showing a significant drop in emissions, the company has avoided paying a coupon step up to its Sustainability-Linked Bond (SLB) bondholders. However, it is unclear how this emissions reduction has been achieved.

Emissions have reportedly reduced by 25% year-on-year, far in excess of the targeted -4% in two years. Detailed analysis of the sustainability report suggests possible creative emissions accounting with regards to steam generated from Municipal Waste Incineration (MWI). This leads us to the following best practice recommendations:

  • Emissions reporting needs to be complete. If MWI is used to reduce Scope 2 emissions without a corresponding reclassification into Scope 3, this represents a carbon footprint arbitrage.
  • SLBs referencing only Scope 1 and 2 emissions are exposed to reclassification risk. Baseline restatements should protect from policy changes, but if Scope 3 emissions are not included from the outset, investors are at risk from such inventive business changes.
  • Where GHG accounting guidance is unclear, as it the case with MWI, care should be taken to ensure emissions reporting considers the ultimate usage of that data. Auditors should take a conservative approach to classification, especially when there are associated SLBs referencing that data.
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