No green ePIFany

2 minute read

The Saudi sovereign wealth fund PIF is looking to do a green bond deal in the midst of an inflow of oil money. We argue this is a 27-bank marketing exercise: green bonds rarely sit well in a pari passu position to a major stake in Aramco.

The optics of climate aligned Saudi government issuance are challenging to begin with, and at closer examination, it is even more difficult to consider this issuance as genuinely ‘green.’

Investors are increasingly setting requirements that a green bond issuer strategically aligns with climate goals, in order to allow to qualify the bond as ‘green.’ One practical way of doing this is to investigate pari passu assets of the green bond(s).

Looking at PIF, various sources indicate the sovereign as aligned to 3 to 4 degrees of warming, and PIF is clearly a direct subsidiary of the sovereign. Looking at a potential PIF green bond, it would sit pari passu with the issuer’s newly acquired stake in Saudi Aramco (4%), its NEOM city giga-project and Newcastle United.

We would be especially concerned with exposure to Saudi Aramco coming directly onto the balance sheet for a green bond investor in case of a credit event.

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