Enel SLBs: market update

3 minute read

In October we published a review of Enel’s Sustainability-Linked Bonds (SLBs), looking at the year-end observation upcoming year-end observation of its Sustainability Performance Target (SPT). Our analysis suggested that a target would likely be missed.

Enel, the largest issuer of SLBs, has a deep and complex bond curve, with securities referencing four separate Sustainability-Linked Financing Frameworks (SLFF). Ten bonds, with a total notional of $10.8bn, will pay a step-up coupon if the Dec 2023 target is missed. However, the market did not seem to be pricing the fact that some bonds could receive a step-up coupon while others not.

Since our report, there have been significant moves within the EUR Enel bond curve; bonds with a step-up depending on the Dec 2023 SPT have outperformed compared to both non-SLBs and SLBs whose targets have already been achieved. SLBs with later targets have outperformed to a lesser extent, perhaps suggesting that missing a target in Dec 2023 would increase the chances of Enel missing subsequent targets.

This strong performance from the SLBs shows the step-up option has value to investors. Despite exogenous shocks being a factor in Enel’s emissions trajectory, the fact that a target could be missed shows there was ambition in its calibration, that its achievement was never guaranteed.