Snam Launches Groundbreaking $2 Billion Sustainability-Linked Bond

Italy's leading energy infrastructure group, Snam, achieved a green finance breakthrough in a $2 billion SLB that links financing to its global Scope 1, 2, and 3 emission goals. The inaugural SLB of its kind to link financing to total net-zero goals for a complete value chain, it establishes a new market benchmark.

Despite recent losses in the SLB market due to concerns over the validity of emissions-related targets, Snam's bond saw heavy demand. The sale was five times oversubscribed with total orders amounting to nearly $10 billion. This is proof of broad investor confidence in Snam's financial well-being and sustainability goals.

The bond offering is a sequel to Snam's April 2025 Sustainable Finance Framework. The valuation of the bond is based on how effective Snam becomes in reducing pre-agreed targets of greenhouse gases. The company will reduce Scope 1 and Scope 2 emissions in 2027 by 25%, in 2030 by 50%, and by 90% in 2050. For Scope 3 emissions as long as indirect Scope 3 emissions within the company's supply chain are concerned, it aims to reduce them by 35% by 2032 and by 90% by 2050. The other emissions up to 10% can be managed by carbon offsetting.

The $2 billion bond has a three-tranche maturity: $750 million in 2030, a further $750 million in 2035, and the last $500 million in 2055. The structured format aligns with Snam's long-term funding and sustainability plan.

This issuance is also significant as Snam's first-time entry into United States capital markets. This step is viewed as strategic to broaden its investor base globally and increase international exposure. With this transaction, 86% of Snam's committed financing now constitutes sustainable finance.

Snam has been a top player in the Italian market as well as the European energy infrastructure market. Its recent bond issuance is an indicator of increased integration of the climate goals into the company's finance plan. It raises the bar further for SLBs by increasing coverage to Scope 3 emissions, which were earlier excluded because of the issue of tracking and managing them.

To most of the market, Snam's approach can urge other issuers to target higher emissions in their green or sustainability-linked bonds. By linking its financial targets to climate goals, Snam is linking business growth to global environmental goals.

This action is fitting given the fact that investors are increasingly seeking more accountability and transparency in ESG investments. Snam's bond issue can also play a critical role in restoring investor confidence in the SLB market through the demonstration that cautious planning and strong emissions targets can build investor interest even in an austerity environment.

Including Scope 3 emissions in the SLB framework is highly important as it accounts for end users' and suppliers' emissions as well as downstream and upstream emissions. They involve a lot of reporting, observing, and coordination for tracking, but if they are included, then a firm-level decarbonisation plan becomes more robust.

With energy transition growing more urgent all over the world, one would imagine initiatives such as Snam's to push capital into companies and ventures that actually have climate objectives. Investing $2 billion into this type of effort, Snam is tapping the capital markets to finance its ambition to make its value chain net-zero by 2050.

Source: EarthOps