Enel innovates with Sustainable Trade Finance arrangements

Latest innovation integrates progressive renewable energy targets into bilateral guarantee facilities.

CIB-Enel-innovates-with-Sustainable-Trade-Finance-arrangements

Italian multinational energy group Enel signed two sustainability-linked guarantee agreements for €500m and €350m respectively with BNP Paribas and BNL, successfully integrating sustainability targets to existing guarantee lines. This €850m sustainable guarantee solution with Enel is one of the very first large bilateral sustainability-linked guarantees seen to date.

Enel’s transaction shows how companies can successfully broaden the scope of sustainable finance beyond bonds and loans, integrating sustainability across their entire financing strategy. As highlighted in its 2020-2022 Strategic Plan, Enel aims to increase the share of sustainable finance sources on its gross debt to 43% in 2022 and to around 77% in 2030 from approx. 22% in 2019.

At the same time, sustainable finance market innovation has now expanded well beyond sustainability-linked loans (SLLs) to include sustainability-linked bonds (SLBs), trade finance instruments such as guarantees and receivables financing, as well as hedges and deposits.

The integration of sustainability-linked mechanisms into trade finance is an important step forward in tangibly supporting corporates to align their sustainability and financing strategies

Aurélia Normand, Head of Transaction Banking EMEA, BNP Paribas

In particular, sustainable trade and working capital is rapidly emerging as an important segment of the sustainable finance market. In 2020, BNP Paribas signed approx. EUR 2.0bn in Sustainability Linked trade finance facilities in EMEA.

Enel’s two sustainability-linked guarantee facilities support one of the key performance indicators (KPIs) identified in the company’s sustainability-linked financing framework: to achieve an 80% reduction in direct greenhouse gas (GHG) emissions in 2030 and to fully decarbonise its energy mix by 2050. The transactions embed sustainability performance targets (SPT) over the next two years:

  • Reach 55% or more of renewable installed capacity by year-end 2021
  • Reach 60% or more of renewable installed capacity by year-end 2022

These targets are in line with Enel’s ambition “to foster best market practices and present a unified and coherent suite of Sustainability-Linked Financing instruments to the market,” as stated in the company’s sustainability-linked financing framework. Enel intends to focus on contributing to the Sustainable Development Goal (SDG) 7 to ensure access to affordable, reliable, sustainable and modern energy for all.

The transaction demonstrates how the bank ultimately supports companies progressing positive environmental impact and social progress for improved sustainable development

Vittorio Ogliengo, Deputy General Manager of BNL and Executive Chairman of BNP Paribas CIB Italy

As a growing number of companies adopt science-based targets and define their trajectories towards achieving the Paris Agreement objectives, they also define their intermediary KPIs which can then be embedded into a broad range of banking solutions, such as guarantee facilities.

Building on Enel’s history of sustainable finance innovation

With approximately 49 GW of installed capacity, Enel is one of the world’s leading private operator in the renewable energy sector. To reach the targets set by the Paris Agreement to fully decarbonise by 2050, Enel has integrated environmental protection and biodiversity into its business model. Tying its transition objectives to financial incentives, Enel issued several green bonds before taking capital markets to the next level with two groundbreaking SDG-linked bonds:

  • In September 2019, Enel issued the world’s first SDG-linked bond with a $1.5 billion 5-year SDG-linked bond, committing to enhancing its renewable energy installed capacity to at least 55% (from 46% as of H1 2019) of total capacity by the end of 2021.
  • The following month, October 2019, Enel followed up with a €2.5 billion triple-tranche SDG-linked bond transaction.

Enel has since been a prolific innovator in sustainable finance and the latest sustainability-linked guarantees complements the company’s existing sustainability-linked finance instruments which already include bonds, revolving credit facilities, term loan euro commercial paper issued in 2019 and 2020.

“For us, finance and sustainability are the guidelines in the strategy of the Bank and the Group to support the real economy, both nationally and worldwide. This deal with the Enel Group, which builds upon our long collaboration and the sharing of common company values, is a tangible example of accelerating economic, environmental and social sustainability. The transaction demonstrates how the bank ultimately supports companies progressing positive environmental impact and social progress for improved sustainable development,” said Vittorio Ogliengo, Deputy General Manager of BNL and Executive Chairman of BNP Paribas CIB Italy.

Aurélia Normand, Head of Transaction Banking EMEA, added: “The integration of sustainability linked mechanisms into trade finance is an important step forward in tangibly supporting corporates to align their sustainability and financing strategies. As companies need to accelerate their transition to net zero, they will continue to look for new sustainable finance solutions across their transaction banking needs.”


Helping corporates in their journey to a sustainable trade finance


The range of sustainable transaction banking solutions keeps expanding. Stepping ahead of this trend, BNP Paribas was one of the first banks to arrange a sustainability linked guarantee facility, a sustainability-linked letter of credit (LC) and a sustainable deposit.

In 2020, BNP Paribas was recognised as the Global Bank of the year for Sustainable Finance by the Treasury Management International Awards, as well as the Best Provider of Sustainable Finance Solutions in Supply Chain Finance by Global Finance, and, for the second consecutive year, Best ESG Transaction Bank from The Asset Asian Awards.

For in-depth analysis on innovation in sustainable trade finance, read Viktor Ivanov’s full interview in Global Trade Review.

Why is supply chain critical for a sustainable global trade? Watch Rodolphe Vergeaud, Head of CIB EMEA Trade and Working Capital Solutions, explain it in a mini-series of videos: