EU Utilities Boost Green Commitments

Nine of Europe’s largest industrial emitters of green bonds – EDF, Enel, Engie, Iberdrola, Icade, Paprec, SNCF Reseau, SSE and TenneT – have pledged to further develop the green bond market, they said in a joint statement December 11, also calling on other industrial corporates to consider following their example.

To qualify as green, all the proceeds of a bond issue must be used in green projects, such as renewable energy, or energy efficient buildings or low-carbon transport, although there has been argument about whether emissions reduction projects qualify for that definition, as well as those that aim at their outright elimination. A €500mn green bond launched by Repsol, to retrofit its refineries, for example was rejected by some green indices, such as Climate Bonds.

The nine companies have so far issued a total of €26bn ($30.7bn) in green bonds – of which Engie has issued €5.25bn – which accounts for over 10% of total outstanding green bonds, they said. Engie said that green bonds were "a critical lever to shape tomorrow's low carbon and socially responsible energy world.”

SSE said its €600mn green bond issued in the summer showed commitment to sustainability: "SSE supports the transition to a low carbon energy system and wants to see a sustainable economy in the UK and Ireland in the long term.” The eight-year, 0.875% green bond provides capital that SSE will use to refinance SSE’s portfolio of recently constructed or under construction onshore wind farms. 

Strong demand allowed SSE to achieve its lowest ever coupon for a senior bond, it said at time of launch, and showed there is "material appetite for financial products aligned with the mitigation of environmental concerns." It added: "Climate change presents a material long-term risk to certain investments. Investing in a green bond that finances assets to mitigate climate change helps to manage that risk over the long term."  

France's EDF and Engie, Italy's Enel, and Spain's Iberdrola are leading European utilities, while SSE is a leading UK energy supplier and network operator, and Dutch state TenneT manages power grids in the Netherlands and part of Germany.  The other three firms are French: SNCF Reseau runs France's rail network, Icade is a property developer, while Paprec is a French waste management operator.