The United Nations Global Compact welcomes the issuance of the first general-purpose SDG-linked bond, an innovative corporate financial instrument that aims to contribute to the achievement of the Sustainable Development Goals (SDGs).
The US$ 1.5 billion bond released by Enel on Thursday was almost three times oversubscribed signaling strong demand for SDG-related investment opportunities. The bond is the first of its kind intended to meet a company’s ordinary financing needs.
Since 2018, the UN Global Compact Action Platform on Financial Innovation has worked to inspire companies to develop innovative private financial instruments that have the potential to direct private finance towards critical sustainability solutions. Enel serves as a patron of the Action Platform, which has released a series of reports on SDG Bonds and sustainable corporate finance.
The latest guidance, SDG Bonds — Leveraging Capital Markets for the SDGs, encourages major players in the investment value chain to build a market for mainstream SDG investments, with enough scale, liquidity and diversification to attract large institutional investors and finance a broad set of private- and public-sector activities in support of the Goals.
“The strong interest from investors shows that the demand for SDG investments is out there,” said Lise Kingo, CEO and Executive Director of the UN Global Compact. “We hope that SDG-linked bonds, like this one, will inspire a flood of innovative financial instruments and demonstrate that a mainstream market for investments in the Global Goals is possible. This is the kind of financial innovation that the world needs to make the 2030 Agenda for Sustainable Development a reality.”
The bond is linked to contributing to the achievement of the SDGs through the increased generation of renewable energy and full decarbonization by 2050. Specifically, according to Enel’s press release, the money raised will be used to advance the following four Global Goals:
- Goal 7 on affordable and clean energy, with over 11.6 GW of additional capacity;
- Goal 9 on industry, innovation and infrastructure, with over 46.9 million smart meters installed and 5.4 billion euros of investment in innovation and digitalization;
- Goal 11 on sustainable cities and communities, with retail investment and new electrification-oriented energy services to achieve, among others, 9.9 GW of demand response capacity and 455,000 charging points for electric mobility; and
- Goal 13 climate action, with a commitment to reduce carbon dioxide emissions to below 0.350 kg/kWheq in 2020 and full decarbonization by 2050.
According to the United Nations Conference on Trade and Development, investments of US$ 5 to 7 trillion are needed each year to realize the SDGs by 2030. While the public sector and public finance will be core to the implementation of the SDGs, it is widely acknowledged that the private sector and capital markets must also play a key role.
As a special initiative of the UN Secretary-General, the United Nations Global Compact works with companies everywhere to align their operations and strategies with ten universal principles in the areas of human rights, labour, environment and anti-corruption. Launched in 2000, the UN Global Compact guides and supports the global business community in advancing UN goals and values through responsible corporate practices. With more than 9,500 companies and 3,000 non-business signatories based in over 160 countries, and over 60 Local Networks, it is the largest corporate sustainability initiative in the world.