In its 2024 report, Italian utility A2A announced it had fallen short of its installed renewable energy target, triggering a step-up to its 1.5% 2028 Sustainability-Linked Bond (SLB).
AFII unpacks the implications of the 25bps step-up, and evaluates how the market anticipated, and then priced, this event.
Our analysis implies that the SLB market is becoming more efficient. Evidence ahead of the report’s publication suggested the target would likely not be achieved, and it appears the market was pricing in at least some of this probability before the target observation date.
As more SLBs approach their observation dates, AFII anticipates the market will become increasingly sensitive to data related to target performance.
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.
