Sovereigns and central banks

Slovenia launches sovereign decarbonisation SLB

Written by Jonas David & Ulf Erlandsson

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This new structure, with a single performance target focused on absolute emissions and a dual step-up/step-down structure, is unique not only among European sovereign issuers but also in a global context.

With a single KPI linked to emissions, the SLB sets incentives for a further reduction of emissions and provides investors with an opportunity to actively support related efforts. Its “stretch targets” incentivise and reward a strong decarbonisation performance beyond the base targets.

Our analysis suggests the targets are ambitious, requiring a considerably higher emissions reduction compared to the country’s historical trajectory. In this paper, we estimate Slovenia’s probability of achieving its Sustainability Performance Targets, and the implications for pricing compared to vanilla bonds.

About the authors

Jonas David

Jonas David

Research Director

Based in London, Jonas researches the role of fixed income markets in the climate transition, focusing on key sectors, sovereigns and development finance. He previously worked in emerging markets fixed income at Morgan Stanley Investment Management and UBS.

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.

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