Telefónica $1b bond targets inclusive connectivity, energy efficiency

Telefónica is issuing a $1 billion senior sustainable bond that will allow the telecom operator to increase its focus on environmental and socioeconomic issues by targeting network energy efficiency and inclusive connectivity.

Sustainable bonds are fixed income instruments backed by the issuing company’s balance sheet that carry the same credit rating as the issuer’s other debts. Issuing these bonds allows enterprises to raise capital to pursue environmental and socioeconomic initiatives.

Sustainable bonds are then used to finance projects with explicit environmental or social purpose such as greenhouse gas (GHG) emission reductions, renewable energy projects, or diversity and inclusion initiatives.

The environmental aspect of sustainable bonds “provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment,” explained Gartner Research VP Moutusi Sau. In this way, growth in the green and sustainable bond markets also indirectly works to disincentivize high carbon-emitting projects.

Fund allocation and impact measurement
The Spain-based operator plans to allocate these latest funds to environmental projects that will improve its energy efficiency by transitioning copper networks to fiber networks along with deploying 5G technology.

The operator’s social projects include securing funding to deploy and improve broadband connectivity in underserved rural areas. This will improve inclusive connectivity and stimulate both entrepreneurship and job creation, according to the company.

Telefónica plans to measure and report the impacts of the projects funded with its sustainable bond in an annual audited report. For environment-focused projects, the operator plans to report energy consumption per data traffic, energy saved, and estimated emissions avoided.

It will analyze the impact of socioeconomic projects based on population covered with broadband in underserved rural areas; the number of entrepreneurs, startup companies, or small to medium enterprises supported by these funds; and the estimated number of jobs created.

Sustainable bond supports UN SDGs
Telefónica says the bond supports its commitment to lower energy consumption per traffic unit 90% by 2025, and to reduce its scope 1 and scope 2 emissions 90% in its main markets over the same time frame. The operator plans to lower its global scope 1 and scope 2 emissions by 80% before 2030.

The sustainable bond also supports the United Nation’s sustainable development goals (SDGs) — namely SDG 7, 11, 12, and 13, which cover affordable and clean energy; sustainable cities and communities; responsible consumption and production; and climate action. The operator aims to be zero waste by 2030, and to help its customers avoid 12 million metric tons of CO2 annually by 2025 with its digital services.

Social projects funded with this sustainable bond tie into SDG 9 — focused on industry, innovation, and infrastructure — because of the “clear relationship between internet connectivity and economic development,” according to the company. SDxCentral