of the University of Zurich compared SLBs with regular corporate bonds issued by the same companies within the past five years. They found that SLBs typically pay about a 0.30 percentage point lower interest rate than a comparable plain bond. The interest rate typically rises only 0.25 percentage point if a borrower misses its sustainability targets, and it triggers much later in the bond’s life, which means the cumulative interest payments are much smaller.
Direct emissions, which include those produced by the company in its buildings or in power plants providing it electricity, are a mere 1.6% of its total footprint. The rest are the indirect emissions generated by the company’s suppliers or customers. Many natural-gas transport companies—including A2A, Nederlandse Gasunie, and Snam—have issued SLBs. Their pipelines send gas across Europe and facilitate much of the continent’s energy use. Yet these companies have tied their direct Scope 1 and 2 emissions only to their bonds, leaving out a huge proportion of emissions.
At other times, companies set targets linked to the bonds that have little to do with the company’s most significant impacts or actual carbon footprint. Aeroporti di Roma SpA issued an SLB with the intention of reducing the emissions produced by the transportation of its employees as they come to work at the airport. It left out the vast majority of the emissions that result from flights taking off and landing there.
The concerns about SLBs aren’t exclusive to the European market. Canadian oil and gas pipeline giant Enbridge Inc. issued a global bond last year that had a carbon intensity target rather than an absolute emissions target. Carbon intensity measures the emissions attached per unit of energy of the fossil fuels transported.
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