$500m sustainability-linked bond released by Enel sees nearly $3bn of orders, as PepsiCo reveals how it is to spend proceeds of $1bn green bond issued last year
The appetite of UK-based investors for sustainable finance has been firmly underscored this week, after the first ever sustainability-linked bond issued in sterling was nearly six times oversubscribed.
In one of a number of recent developments that have highlighted the growing popularity of environmental, social, and governance (ESG) investment, Italian utility Enel revealed yesterday that it received £3bn of orders for a £500m sustainability-linked sterling bond designed to finance the expansion of its clean energy generation business.
Giulio Baratta, Enel's EMEA head of DCM corporates, said the success of the issue highlighted the financial markets' appetite for the clean energy transition.
"The Enel transaction opens up a new market for sustainability-linked bonds, having proven the strong investor interest for the first ever SLB in GBP which highlights the market's appetite for transition," he said.
The seven-year bond is linked to Enel's ability to increase its renewables base to 60 per cent of its total installed capacity by the end of 2022, up from roughly 52 per cent today.If the company misses that target, a 25 basis points (bps) coupon increase will be triggered.
The bond's release comes as pressure from investors mounts on the UK government to release a sovereign green bond that can support investments in low carbon infrastructure that would provide jobs and steer a green economic recovery in the wake of the coronavirus.
The issue of the sterling market's inaugural sustainability-linked bond also comes as PepsiCo published the initial allocation of proceeds from the company's first ever green bond, a $1bn instrument issued in October 2019.
Roughly $447m of the net proceeds had been allocated by the end of 2019, the US food and drinks giant said, with roughly $200m being earmarked for sourcing recycled polyethylene terephthalate (rPET) plastic for the company's North American operations.
In addition, it revealed more than $110m had been allocated to help transition the company's fleet to low carbon alternatives and $98m is set to fund construction of a solar-powered R&D facility in New York. A further $9m from the bond's issue is to be channelled towards improving water-use efficiency at the company's plants, it said.
And in further evidence of the booming green bond market, the City of Paris announced yesterday that it will release a €300m sustainable bond on 20 October that will be used to finance projects that fall under its 'sustainable bond framework'.
Issuance of green bonds - debt instruments designed to raise funds for projects and businesses that have a positive environmental and social impact - has grown rapidly in recent years, with a recent study from BloombergNEF indicating that $200bn have been issued in 2020 so far, with a cumulative total of $1tr since 2007.
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