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The revival of fossil fuels in European energy policy risks triggering the first wave of financial penalties in the global market for ESG bonds.
A test case is about to unfold in Greece, where energy supplier Public Power Corp. may find it “virtually impossible” to meet the end-of-year emissions target on some of its debt, according to an analysis conducted by the Anthropocene Fixed Income Institute.
That’s as regulators, government officials and industry representatives agree on crisis policies that are delaying the company’s phase-out of lignite coal production, which could also make it challenging to meet a separate end-2023 target, AFII said.
The debt in question is a sustainability-linked bond. SLBs typically see issuers pay a penalty if they miss pre-determined environmental, social or governance goals. But with Europe’s decision to ramp up coal production in response to the current energy crisis, near-term climate commitments are being derailed. And that’s left many utilities with little choice but to adapt.
PPC “takes its environmental and social role very seriously,” a spokesperson for the Athens-based company said in an emailed comment.
“In this context and prior to the energy crisis and the conflict in Ukraine, PPC has communicated an aggressive delignitization plan, adopting a move toward renewable energy sources which would lead to substantial reductions in CO2 emissions.”
– Bloomberg
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