New SNAM framework and the green-gas debate


New SNAM framework and the green-gas debate

As “browner” sectors continue to find appropriate ways of embracing sustainable finance, it is worth highlighting a new landmark framework, the SNAM Climate Action Bond Framework, which Europe’s leading gas utility firm – and one of Italy’s largest companies – has published at the beginning of November.

Highlights of the SNAM framework

While structurally similar to a green bond, SNAM has worked with DNV to create a Climate Action bond suitable for its own project mix and sector, acknowledging in its framework for the bond, the sensitivities around natural gas amidst many green market stakeholders, but also stressing the importance of gas as a “flexible, safe and low environmental-impact fuel”.

In this context, to win investors' trust and provide additional authority, the framework has been aligned with the Italian government’s “National Adaptation Plan for Climate Change”, and SNAM pledges to deliver a positive impact to the 17 United Nation’s Sustainable Development Goals (“SDG”), focusing on four key goals:

  • SDG 7: Affordable and clean energy
  • SDG 9: Industry, innovation and infrastructure
  • SDG 11: Sustainable cities and communities
  • SDG 13: Climate action

Furthermore, DNV GL Business Assurance Services had been tasked to create a SNAM specific Climate Action Bond Eligibility Assessment Protocol in which DNV concluded that the bond meets the criteria established in the Protocol and that it is aligned with SNAM’s Climate Action Bond Framework, Italy’s PNACC and the Green Bond Principles 2018.  

The framework lists four project categories, for which the proceeds of the bond will be used:

1) Carbon and Emission Reduction Projects include the replacements of old generation boilers, turbo-chargers and valves 

2) Renewable energy projects, which include development of new biomethane plants and upgrading of existing biogas plants

3) “Energy Efficiency Projects” for SNAM’s corporate facilities or supply chain, such as – for example – the replacement of traditional lamps with LED lamps and the implementation of energy management systems and

4)  “Green Development Projects” targeting the development and maintenance of conservation areas, natural capital preservation and the development and maintenance of green areas and buildings.

SNAM also details in its framework how it will ensure transparency and manage governance by setting out a process for stakeholder engagement and reporting to stakeholders, involving a number of teams such as the finance department, a climate action bond committee, functional staff, the CSR department and an external accountant.

Investor engagement is crucial

SNAM’s Climate Action Bond Framework can be a good example for green bond issuers, who want to opt for a self-designed framework to suit their specific green agenda, rather than just plain following the market leading Green Bonds principles.

While there are obvious benefits for the issuer, it may create concerns amongst investors around governance, long-term climate benefits and product liquidity.

SNAM, anticipating these worries, has addressed all of these questions in its framework, however, it will now have to prove over the coming years that it delivers on the framework’s pledges by proactively engaging investors.


 

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in the Netherlands, authorised and regulated by De Nederlandsche Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, the Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, the Netherlands. Branch Reg No. in England BR001029. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc.

Copyright © NatWest Markets Plc. All rights reserved.

 

15th November 2018

Author:

Dr Arthur Krebbers
Sustainable Finance 
Co-ordinator

Set Tab for lightbox