Our structure puts in a step-up in case of missing National Determined Contribution targets of a 40% reduction between 2018 to 2030, and a step-down for a further 5% decarbonisation. Assuming a fair chance of meeting the targets, the option premium is priced to 5bps running, and would mean a markedly lower cost-of-capital for the issuer if successful in achieving decarbonisation. At the same time, the structure should provide an attractive optionality to investors with requirements to decarbonise their portfolios.
