Snam’s (not at all) green finance, ReCommon’s new report on the Italian false transition

ReCommon publishes today its report “Snam’s (not at all) green finance”. On the eve of Snam’s shareholders’ meeting, which again this year will be held behind closed doors thanks to an ad hoc rule introduced by the government in the “Mille Proroghe” decree, the association examines how green really are the bonds placed on the market by the Italian gas transmission system operator (TSO) Snam. The corporation is among the leading ones for the management and construction of gas infrastructure, and it is 30% owned by the Italian state.

Snam's (not at all) green finance
Snam's (not at all) green finance
REPORT PDF | 210.50 KB

ReCommon thus found that a large part of the capital raised might not be used to finance the reduction of fossil fuel exposure, as Snam has been trumpeting in its “decarbonisation path”. The company’s energy transition would remain mostly on paper and as a sort of lure, because in practice Snam would continue to invest billions of euros in the fossil business.

Since 2019, Snam has issued six green bonds for a total of €2.85 billion. In addition to these, the first sustainability-linked bond issued by the company in January 2022. Considering that Snam’s bond issuance over this time frame amounts to approximately €12.5 billion, it means that more than a third of the capital raised by the corporation falls into the green category. Technically, green bonds pay periodic interest and finance green projects in line with United Nations standards. The entire capital is allocated to these initiatives, but only gradually. As the company specified in a report published last March, the so-called eligible projects have so far only received about 60 per cent of the nearly three billion planned. As a result, the unallocated portion can be used to finance any other type of operation in the immediate future, including – DNV GL, the Norwegian company that certified the bonds, said – those not related to decarbonisation such as “the repayment of outstanding credit lines or the settlement of outstanding debts”.

But there is also a problem with the so-called eligible projects defined in the Climate action bond and Transition bonds issued by Snam. As the corporation explained, 56% of the total amount raised by the bonds will be used to prepare the network for the transport of the gas/hydrogen mixture. Renewables, represented in this case by investments in biogas, will collect just 14% of the proceeds. “Snam’s main activity is the construction and management of energy infrastructure. Therefore, the allocation of 56% of resources to prepare the hydrogen transmission network (retrofit) is perfectly consistent with its role,” said the company, in fact confirming that the much-vaunted green bonds are nothing short of a very faded green.

ReCommon has also formally questioned the company on these issues, using its role as a shareholder to understand, for example, the details of the projects financed with the proceeds from the “green” bonds and already invested. “Snam uses evocative names for its green bond issuance, but then uses the proceeds for operations rooted in the fossil business,” said Elena Gerebizza and Filippo Taglieri, authors of the report. “There are many voices critical of blending, i.e. transporting minimal amounts of hydrogen mixed with fossil gas, which would be to the total advantage of companies like Snam, whose goal is to extend the life of the gas supply chain.” “The company does not even make explicit what kind of hydrogen it is, which in fact could also be hydrogen produced from fossil gas, whose climate impact is even higher than that of gas,” Gerebizza and Taglieri conclude.

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