Czech it out: ČEZ returns to the SLB market

As a country still reliant on coal for energy production, decarbonisation in Czech Republic is meaningful. Use of SLBs by ČEZ improves accountability for achieving its targeted reductions.

The latest bond is linked again to the 2030 target, which is aligned to 2°C reduction. There is 2033 target, aligned to 1.5°C, which may be used in the future for longer dated issuance.

Interestingly all the SLBs use the same payment structure, of 0.75% premium payment. This means the longer bonds should have similar option values, which suggests the new bond may soon converge in pricing. For the shorter bond, where 2024 reporting will give guidance on the likelihood of achieving the 2025 target, this structure may increase price volatility.

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.

Emiel Loh

Emiel was formerly a Research Analyst at AFII.