Sustainability-Linked Bonds

SLB bond radar: Eni (potentially) coming to market

Written by Ulf Erlandsson, Stephanie Mielnik & Josephine Richardson

Download full paper (0.1mb)

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.

About the authors

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

Josephine Richardson

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.

Before you sign up

By completing this form, you agree to AFII sharing information that we think you may be interested in, including our insights on climate transition. See our Data Protection Policy for more information about how we collect and use your personal data, and any rights you may have in relation to your personal data. You may opt out from our distribution list at any time.