Both targets require a departure from historical trends. Net GHG emissions would need to fall to 152 MtCO2e by 2035, a 47% reduction from 2019 levels, while protected land areas and OECMs would need to reach 30% by 2030, up from 18.44% in 2024. We use illustrative probabilities of 20% and 40%, respectively, of achieving them.
However, ambitious targets do not automatically make an ambitious SLB. With coupon steps of just +/-0.025% p.a. for each target, the signalling value appears greater than the option value for investors. Differing observation dates and reporting time lags also give the nature target the greater structural weight.
Our option pricing analysis suggests a small positive option value, but it appears too small to be material to pricing. More meaningful steps, and/or longer periods they would apply, would improve the structure’s financial materiality.
