A review of SLBs approaching KPI observation dates

We find that the observation process could represent both opportunities and risks for investors. Price volatility is to be expected when expectations change around the issuer achieving its Sustainability Performance Targets (SPTs).

We illustrate the dynamics by analysing two current cases: Italian ultility company Enel, and PPC, a Greek energy producer. Italian utility company Enel’s 2022 renewables target appears achievable but there are greater risks to its emissions target in 2023, due to changing government energy policy.

A coupon step-up, potentially accompanied by technical selling from green funds, could present an attractive opportunity to increase exposure if investors believe in the company's long term sustainability performance.

PPC, a Greek utility, has stated that it believes its emissions target in 2022 is at risk, and this could impact its future funding environment.

About the authors

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

Stephanie Mielnik

Stephanie was previously a Director of Research at AFII.

Johan Jarnmo

Associate Director, Portfolio Strategy

Johan develops tools and analytics that help fixed income investors invest in a climate- and nature-positive way, including AFII’s portfolio tools Co₂liseum and FIONA. He previously worked in Deloitte’s Risk Advisory practice.