Greenwashing Exposed: Eni's Sustainability-Linked Bonds Fail to Deliver on Climate Commitments
Across Europe, a massive greenwashing operation is quietly unfolding, affecting thousands of investors who believe they are supporting climate-friendly initiatives. This investigation delves into the case of Eni, Italy's largest and the world's 13th largest fossil fuel company, and its "green-labelled" bonds that may be funding carbon-emitting activities, undermining the very energy transition and climate goals that Eni claims to support.Eni's Sustainability-Linked Bonds: A Facade for Fossil Fuel Financing
Eni's Sustainability Strategy: Misleading Investors
Eni's CEO, Claudio Descalzi, has persuaded thousands of investors across Europe to back a sustainability strategy that can be summed up as: "Give me your money to mitigate climate change, and then I'll decide how much of it goes towards exacerbating climate change." Descalzi has been at the helm of the state-controlled company for over a decade, earning a staggering €1.6 million a year, and has navigated through four different Italian governments.The Controversial Sustainability-Linked Bonds
The financial products issued by Eni are called "Sustainability-Linked Bonds" (SLBs), which are designed to attract investors concerned about the environment. However, there is growing concern that the money raised by these bonds could end up further funding fossil fuel activities rather than helping the environment. Eni has been promoting these "green-labelled" financial products in several European countries, with the backing of the Italian ministry of economy and finance, which owns more than 30 percent of the company's shares, and a coalition of banks that marketed the bonds while downplaying experts' warnings about their true environmental impact.The Shortcomings of Eni's SLBs
Eni's SLBs are linked to two key performance indicators (KPIs): increasing renewable energy capacity by 5 gigawatts (GW) and reducing greenhouse gas emissions from its operations by 65% compared to 2018 levels. However, these targets are limited in scope, as they only address Eni's direct emissions (Scope 1 and 2) and exclude the much larger indirect emissions (Scope 3) from the use of its products by customers. Additionally, Eni plans to offset a significant portion of its emissions through the purchase of carbon credits, which is a cheaper way to reduce its carbon footprint rather than actually transitioning to renewable energy.Lack of Transparency and Oversight
The ESG bond market, including SLBs, operates under voluntary guidelines set by the International Capital Market Association (ICMA), a trade association that includes the companies that issue the bonds, the agencies that certify them, and the banks that market them to investors. This creates a conflict of interest, as the same actors who benefit from these bonds also set the rules and ensure compliance. In Italy, the national financial markets regulator, Consob, simply approved Eni's SLBs based on general rules for financial products, without examining their environmental merits.Eni's Greenwashing Tactics
Eni's SLBs have been heavily promoted by the Italian mainstream media, which has reported on the company's statements without questioning its weak commitments to reduce carbon emissions. The success of these bonds was also boosted by the enthusiastic attitude of the media, which described the bonds as "sustainable" and "green" – two categories of ESG bonds that have much stricter criteria than SLBs.The Role of Financial Institutions
Major banks, including Intesa Sanpaolo and UniCredit, have coordinated the consortium of banks that commercialized Eni's €2 billion SLB reserved for Italian retail investors in January 2023. These banks, along with Eni and Moody's (the assessor that certified Eni's "Sustainability-Linked Financing Framework"), are all members of the ICMA, working together to promote these financial products.The Lack of Meaningful Climate Impact
Eni's SLBs are unlikely to make a significant contribution to reducing greenhouse gas emissions. The company has set weak climate targets, committing to reduce only a small fraction of its total emissions and relying heavily on carbon offsets to meet its goals. This approach is at odds with the recommendations of the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC), which emphasize the need for immediate action to reduce all greenhouse gas emissions (Scopes 1, 2, and 3) to achieve the 1.5°C objective of the Paris Agreement.The Potential for Greenwashing in the SLB Market
The analysis of Eni's SLBs reveals similar problems in other fossil fuel companies' SLBs, highlighting the potential for greenwashing in this market. While the SLB concept has great potential for impact, not all the bonds launched so far have had a meaningful impact or set high standards and concrete goals. The lack of transparency and the flexibility granted to issuers in the use of proceeds raise concerns about the ability of investors to make informed decisions when purchasing these bonds.In conclusion, Eni's Sustainability-Linked Bonds are a prime example of the greenwashing that is quietly unfolding across Europe, undermining the trust of investors who believe they are supporting climate-friendly initiatives. The lack of transparency, weak climate commitments, and the flexibility granted to issuers in the use of proceeds raise serious doubts about the true environmental impact of these financial products. As the ESG bond market continues to grow, greater oversight and stricter regulations are needed to ensure that these financial instruments genuinely contribute to the energy transition and climate goals.
