On May 21, 2025, Italian energy infrastructure giant Snam raised $2 billion through a multi-tranche, USD-denominated Sustainability-Linked Bond (SLB), the first globally to tie its cost of debt to net zero targets across Scope 1, 2, and 3 greenhouse gas (GHG) emissions. Oversubscribed fivefold with $10 billion in orders, the bond marks Snam’s U.S. market debut, boosting its sustainable finance share to 86% and diversifying 10% of its funding into foreign currency. With ambitious targets—25% Scope 1 and 2 cuts by 2027, 35% Scope 3 cuts by 2032, and net zero by 2050—Snam sets a high bar, but can it navigate gas reliance and greenwashing risks to deliver on its climate promises?

Bond Structure and Investor Appeal

The SLB, issued under Rule 144A/Reg S, comprises three tranches:

• 5-Year: $750 million, 5.000% coupon, 5.113% yield, maturing May 28, 2030

• 10-Year: $750 million, 5.750% coupon, 5.777% yield, maturing May 28, 2035

• 30-Year: $500 million, 6.500% coupon, 6.522% yield, maturing May 28, 2055

The weighted average euro-equivalent yield is ~4.0%, competitive for a BBB+ rated issuer. Joint bookrunners included Barclays, BNP Paribas, BofA Securities, Citigroup, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, SMBC, and Société Générale. The bond’s KPIs link debt servicing costs to:

• Scope 1 & 2: 25% reduction by 2027, 50% by 2035, 90% by 2050 (vs. 2018)

• Scope 3: 35% reduction by 2032, 90% by 2050 (vs. 2019)

• Net Zero: All scopes by 2050, with up to 10% offsets

The 5x oversubscription reflects investor confidence, driven by Snam’s monopoly in Italy’s gas infrastructure (90% of €3.2 billion 2024 EBITDA from regulated activities) and its Sustainable Finance Framework, updated in April 2025 with ISS Corporate’s Second Party Opinion.

“This bond diversifies our funding and accelerates our sustainable finance path,” said CEO Agostino Scornajenchi. “U.S. investor interest confirms trust in our vision.”

Read more: Alt Carbon’s $12M Seed Round to Scale Enhanced Rock Weathering in India

Strategic Context and Climate Goals

Snam, managing 33,000 km of gas pipelines, aims for carbon neutrality by 2040 for Scope 1 and 2 and net zero across all scopes by 2050, aligning with the Paris Agreement’s 1.5°C target. Its 2025-2029 plan allocates €12.4 billion, with 60% for gas infrastructure and 40% for green projects like biomethane, hydrogen, and CCS. Key actions include:

• Methane Reduction: 55% cut by 2025 vs. 2015, exceeding OGMP 2.0’s 45% target, via Leak Detection and Repair (LDAR) and electric compressors.

• Green Energy: 65% of electricity from renewables by 2025, up from 50% in 2023.

• Scope 3: 46% cut in emissions from suppliers and associates by 2030 vs. 2019, with supplier CDP questionnaires and green fuel incentives.

The SLB builds on Snam’s sustainable finance leadership, following a €4 billion sustainability-linked credit line in 2024 and a €1.5 billion dual-tranche bond, including Italy’s first Scope 3-linked SLB. Sustainable finance now covers 86% of its €15 billion funding, nearing a 90% target by 2029.

Why It Matters?

This SLB is a milestone in sustainable finance, addressing investor skepticism about SLBs after a 30% issuance drop in 2024 due to greenwashing concerns. Unlike green bonds, SLBs tie coupons to KPIs, not project-specific proceeds, offering flexibility but risking weak targets. Snam’s bond, with robust, SBTi-aligned KPIs covering all emission scopes, sets a precedent, especially as Scope 3 (90% of Snam’s 2023 emissions) is often excluded.

The deal aligns with global trends. Alt Carbon’s $12M for rock weathering and Meta’s 650 MW solar PPAs show CDR and renewable financing gaining traction. Snam’s focus on hydrogen and CCS supports Europe’s Green Deal, with Italy’s gas demand (down 19% since 2021) pushing electrification. The bond’s U.S. debut taps a $4 trillion market, diversifying beyond Europe’s €1 trillion bond pool.

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Risks and Challenges

• Gas Reliance: IEEFA warns that 55% of Snam’s €27 billion 2025-2034 capex targets gas infrastructure, risking carbon lock-in as Italy electrifies. Only 29% of 2023 capex aligned with EU taxonomy, exposing greenwashing risks.

• Scope 3 Complexity: Reducing supplier and end-user emissions (e.g., from gas combustion) is tough, as Snam controls only transport. Its 35% cut by 2032 assumes supplier decarbonization, which lagged in 2023.

• Offsets: Allowing 10% offsets by 2050 could undermine credibility if not high-quality, per ICVCM standards.

• Policy Risks: Trump’s 2025 fossil fuel push may weaken EU carbon markets (ETS at €40/ton in 2025), raising costs for Snam’s CCS and hydrogen bets.

• Market Risks: Rising U.S. yields (4.5% for 10-year Treasuries) could pressure long-term tranches, especially the 2055 bond.

What’s Next?

Snam will use proceeds to fund its €12.3 billion capex plan, including €1 billion for hydrogen-ready pipelines and €500 million for CCS by 2029. It aims to align 50% of capex with EU taxonomy by 2030, per its January 2025 plan, and may issue more SLBs to hit €20 billion in sustainable debt. A 2026 EU Green Bond Standard review could enhance its framework’s rigor.

Globally, SLBs could reach €500 billion annually by 2030 if credibility improves, per BloombergNEF. Snam’s bond, alongside initiatives like Boralex’s 450 MW solar projects, signals finance’s role in decarbonization, but gas reliance tests its transition.

CEO Scornajenchi said, “This bond cements our sustainability leadership.”

Will Snam’s bold SLB drive a net-zero future, or falter under gas infrastructure’s weight?

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