APG has participated in the landmark first-ever SDG-linked USD bond deal, issued by Enel. APG does this on behalf of its pension fund clients ABP, bpfBOUW and SPW. Being the largest electric utility in Italy and one of the largest in the world, Enel is a big renewables developer with power assets across the globe.
The new bond takes sustainable financing one step further than green or sustainability bonds. Whereas the proceeds of the latter are used to fund green or social projects, the Enel bond is the first to be directly linked to the United Nations Sustainable Development Goals (SDGs). These goals - 17 in total - aim to achieve a better and more sustainable future for all and address the major global challenges, including poverty, inequality and climate change.
Enel has promised investors that 55% of its electricity generation capacity will be renewable by the end of 2021. This contributes to SDG 7: Affordable and clean energy. If Enel is unable to meet this commitment, investors will receive 0.25% extra interest on their bond holdings. As of June 30, 2019, 46% of Enel’s capacity was classified as renewable.
Three times oversubscribed
APG’s participation in the deal was well-received by the company and the banks involved in marketing the deal, as they looked for participation by credible, sustainability-oriented investors. Given this context, they view APG as an anchor investor. Although the deal was almost three times oversubscribed, APG received its full allocation of USD 50 million. This highlights APG’s standing in the market as a leading responsible investor as well as its long lasting relationship with Enel.
The deal also demonstrates APG’s active role in the sustainable finance market. Over the last year, APG’s credit team continuously engaged with parties involved on how to structure the transaction. APG was one of the investors Enel elected to meet with and discuss which particular features of an SDG-linked bond APG and others investors would support.
In the future, Enel hopes more of its bonds will contain these types of SDG commitments, perhaps also related to other SDG's. This way, Enel signals to the investment community that they are a sustainable company and serious about their commitment to advancing the UN SDGs. Enel hopes that this will catch on in the market place and encourage other firms to issue similar bonds.