SLB bond radar: Eni (potentially) coming to market

5 minute read

Italian oil company Eni (Ticker: ENIIM) might be coming to market. Eni as an oil company was one of the first in the sector to issue a sustainability-linked bond (SLB). It is AFII’s view that SLBs can be a crucial transition financing instrument, even if the general SLB market has not always been sufficiently ambitious so far. Eni has a fairly substantial transition plan for net-zero by 2050, signified by four key performance indicators (KPIs), and with an almost linear trajectory to 2050 (rather than back-loaded). The KPIs include Scope 3 emissions, which is a clear positive.

Any forthcoming Eni bond issuance that fully aligns with the sustainability KPIs would be an important step in towards driving more ambition into the SLB market. So far, despite the overarching issuer KPIs, the specific Eni SLB instrument has not included Scope 3-related sustainability performance targets (SPTs). We believe that Scope 3 SPTs will highlight enhanced impact opportunity and should drive beneficial pricing.

There is substantial pressure in cash bond markets which normally leads to issuers having to issue new bonds at substantial premiums to secondaries. Add to this a particular dynamic around Italy, and one would expect any issuance to come at a substantial new issue premium (NIP). Indeed, we see this as an opportunity to apply the option-pricing approach presented in earlier AFII papers to drive both ambition of SPTs as well as the opportunity to lower cost-of-capital for the issuer.