Sustainable finance and SDG investments

In recent years, sustainable finance and its related instruments has taken on an increasingly significant role within the global financial landscape. This has given Snam the opportunity to enhance its own role and work as a sustainable company, guaranteeing broad access to financial markets at competitive costs, with positive effects on its economic and statement of financial position and reputation. In addition, with the aim of aligning the financing strategy with its sustainability targets and expanding its investor base, in 2018 Snam had already finalised the transformation into syndicated credit lines of 3.2 billion euros into Sustainable Loans, introducing environmental, social and governance (ESG) objectives. These objectives were met in 2019 and 2020, meaning Snam could benefit from a reduced interest rate on its Sustainable Loan.

For the 2020-2024 Plan, the Group aims at increasing the weight of sustainable finance up to 60% of the funding available within the scope of the plan. To promote this increase, the Euro Commercial Paper programme was renewed and increased from 2 to 2.5 billion euros, involving it in the ESGs that are in line with the Sustainable Loan (obtaining, for the instrument, an ESG rating of EE, assigned by the ESG Ratings company, Standard Ethics).

In recognition of the Group efforts, Snam joined the Nasdaq Sustainable Bond Network, a sustainable finance platform managed by Nasdaq, that unites investors, issuers, investment banks and specialist organisations. During 2020, Snam also increased its meetings and relations with socially responsible investors who are becoming increasingly important within the financial market. There is a total of 245 investors classified as ESGs within Snam’s shareholding, representing 34.1% of the total number of Snam’s institutional shareholders at September 2020 (Nasdaq analysis), and 13.8% of the overall number.

Since 2018, Snam has been a member of the Corporate Forum on Sustainable Finance (CFSF). In November 2020, the Forum confirmed the role of sustainable finance as a crucial support in projects with a positive social and environmental impact, but it also highlighted certain challenges for sustainable finance:

1. further integration of the sustainability policies with the company’s financial strategies;
2. working in synergy with the investors to stimulate the development of a more sustainable economy through innovative financial instruments;
3. increasing the company’s presence in international and Italian forums that contribute to the development of sustainable financial markets;
4. actively participating in the definition of regulatory standards and frameworks that govern the sustainable financial instruments;
5. collaborating with rating companies to more deeply incorporate the ESG criteria into the assessment of the long-term financial sustainability of companies;
6. building on expertise and promote best practices that realise the impact of the strategies applied.

The complementary activities and sustainable financial instruments implemented by Snam over the years contribute to a common objective: making the Company more transparent, attracting a wider range of investors and highlighting its constant and growing involvement in ESG issues and efforts to achieve SDGs.

Climate Action and Transition Bonds issued by Snam

In 2019, Snam was one of the first companies in the world to issue a Climate Action Bond, with a reference framework dating back to 2018. The aim of the Climate Action Bond was to better align its financial strategy with the Group’s sustainability targets, consolidate Snam’s role in energy transition within Europe, raise the awareness of investors around their own ESG initiatives and investments and diversify the investor base. The funds obtained with the Climate Action Bond were used to finance and, in part, refinance the Eligible Projects defined in the Climate Action Bond Framework and reported in the table below. The projects cover a broad spectrum of initiatives aimed at reducing emissions or using renewable energy, energy efficiency and protecting the local area and biodiversity.

The bond issued was also certified by DNV GL that confirmed the bond’s alignment with the suitable categories defined in the framework.

In 2020, Snam reconfirmed that it was fully committed to further integrating the Group’s sustainability objectives with the company’s financial strategy by implementing and issuing two Transition Bonds. The first was issued in June for 500 million euros, for a duration of ten years, and the second, issued in Europe, was the first to be issued by a gas transportation utility. The second Transition Bond was issued in November for 600 million euros for a duration of eight years, the longest bond issue with a coupon of 0% issued by an Italian issuer.

The Eligible Categories perimeter, already identified in the Climate Action Bond Framework, now includes the new category “Retrofit of gas transmission network”, or any activity on the gas network aimed at improving the integration of hydrogen and other low-carbon gases, as defined in the Transition Bond Framework published in June 2020.

This last category was inserted with the intention to align Snam’s initiatives with the mitigation criteria identified by the Taxonomy of the European Commission on sustainable finance.

In March 2021, as part of the Environmental Finance Bond Awards, Snam’s Transition Bond Framework, published in June 2020, was recognised in the Award for Innovation – Use of Proceeds (Green Bond) category, demonstrating the market’s recognition of the company’s commitment to sustainable finance.

The Transition Bond further expands Snam’s investor base and also establishes the rules around the issue of bond loans aimed at financing environmental sustainability investments, in line with the key role, attributed to renewable gases, of achieving the long-term decarbonisation goals, and with the role that can be assumed by the existing infrastructure facilitating this transition.

The table below reports the list of Eligible Projects envisaged by Snam’s Transition Bond.

At 31 December 2020, Snam financed eligible projects worth approximately 965 million euros¹² (vs 235 million euros in 2019), equal to approximately 60% of the bond issues concluded by 2020. As shown in the two graphs below, around 47% of the total amount financed was allocated to the fifth category of the current Framework (i.e., Retrofit of gas transmission network), which included more than 60% of all the eligible projects.

The CFO Taskforce and investments in support of SDGs

In 2009, Snam had already made it clear that it was committed to a sustainable business development model, to observing and protecting human and working rights and to protecting the environment by complying with the UN Global Compact, the largest-scale worldwide voluntary initiative on sustainability issues.

For Snam, this commitment also involves the integration and alignment of financial planning procedures with the SDGs, an objective further strengthened through active participation in the UN Global Compact CFO Taskforce, of which Snam is a founding member. The initiative involves different actors in the business sector: investors, banks, financial institutions and credit rating agencies to make the market more efficient, broader and fluid and to promote the flow of capital to activities that contribute significantly to these goals.

In September 2020, the Taskforce launched the first principles integrated and supported by the United Nations for investment and finance, developed to guide companies to align their sustainability commitments with corporate financial strategies to generate a significant impact on SDGs. As a member of the CFO Taskforce, Snam is committed to adopting these guidelines, implementing specific KPIs and sharing experiences to help create a transparent and efficient SDG financial market.

At the same time as approving the 2020-2024 Plan, the Group carried out an analysis to confirm the alignment between the SDGs and the investments included in the strategic Plan. This analysis highlighted the SDGs that the Plan would impact most significantly, showing alignment between the investments and the Group’s priority ESGs. In particular, while contributing transversally to many of the United Nations SDGs, the 2020-2024 Plan will have an effective and significant impact on SDGs 7, 13, 9 and 11 (in order of priority).

Breakdown of the investments aligned with the SDGs in the 2020-2024 Plan