Exploiting the energy of change: Sustainable finance

In 2018 Snam decided to diversify its sources of funding leveraging “sustainable finance” instruments for the purpose of aligning its financing strategy as closely as possible with the general goal of the Group of making its business more sustainable and climate-friendly in the medium/long term.

Snam decided to integrate its financing options with two types of financial products: sustainable loans (lines of credit linked to sustainability indices, ESG performance and business ethics) and climate action bonds (bonds whose issue is linked to projects with a positive impact on the environment).

With regard to the first of the two types of funding mentioned above, in 2018 Snam transformed its €3.2 billion syndicated loan into a sustainable loan, making it, in size, the third largest loan of this type in the world and the largest for a utility operating in the natural gas sector. This loan involves bonus/malus mechanisms dependent on the reaching of certain KPIs under the scope of ESG also including the attainment of specific corporate targets.

In 2018 Snam converted its

€ 3.2 Bn

syndicated loan into a sustainable loan (the third largest loan of this type in the world)

Specifically, the targets set in the loan agreement consist of:

  • a reduction in the natural gas emissions;
  • the recovery of the natural gas released each year during transport network maintenance activities;
  • an increase in the dissemination of the performance management system within the company.

Whether or not these targets are reached, partly or totally, will result in a potential increase or decrease in the margin applied to the loan. The independent Standard Ethics Rating (SER) company issued a sustainability opinion to the lending banks, noting the consistency of the targets to be reached.

Additionally, during the year Snam published the Climate Action Bond Framework, which defines the criteria for the future issuance of bonds for financing investments under the scope of environmental sustainability. The funds from the issuance of the Snam Climate Action Bond will be used to fund existing or future projects for reducing emissions of pollutant gases, renewable energy, energy efficiency, the development of new green buildings and conservation of natural capital in areas affected by the Company’s activities. The Snam’s Climate Action Bond Framework received a second party opinion from the independent company DNV GL which gave a positive evaluation of the projects included in the framework and the decision-making process followed by Snam for selecting sustainable investments.

In addition to this, in September, the company became a supporter of the TCFD (Task Force on Climate-related financial disclosures) and made a commitment to report its strategic decisions integrating them with those related to climate change.

2018 Engagement activity

In addition to the normal activities of presenting the Strategic Plan and conference calls upon the publication of the Company’s results (annual, semi-annual and quarterly) during 2018, the following were carried out:

  • 11 road show to meet shareholders and institutional investors at the major financial centres of Europe and North America;
  • 15 industry conferences allowing investors specialising in the utilities and nfrastructure sectors to meet senior management;
  • 117 one – to – one meetings between management and investors, in addition to numerous group meetings (for a total of 161 meetings).

All the environmental and climate initiatives make Snam one of the leading Italian organisations in terms of sustainability issues. The company is actually included in many of the most important European and global sustainability indices. In 2018 also, Snam’s shares were included on the main international SRI stock exchange indices, a fundamental instrument from the perspective of market transparency and comparability with peers. This result helps improve the company’s visibility vis-à-vis investors, as well as the entire financial market. Specifically, Snam shares were confirmed for the tenth consecutive year on the Dow Jones Sustainability World Index, the most important global stock exchange index for evaluating the social responsibility of companies. It takes into consideration the top 300 Dow Jones Global Total Stock Market Index companies based on economic, social and environmental performance, also taking into account how the companies approach issues such as governance, the mitigation of climate change, risk management, the standards of suppliers and the conditions of employees.

This implies the non-participation of those companies which do not operate in an ethical and sustainable way and the exclusion of those already present but which are not committed to the continuous improvement of their performance.

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