Project Details
Project
Tele2 Green and Sustainability-Linked Financing Framework Second Party Opinion (2022)
Client
Tele2 AB
Project Type
Sustainability Linked Bond or Note; Green Bond/Loan;
Industry Group
Telecommunication Services
Use of Proceeds
Renewable energy; Clean transport; Energy efficiency;
Location
Sweden
Evaluation Date
May 2022
Evaluation Summary
Use of Proceeds Instruments
Green Bond Principles 2021 and Green Loan Principles 2021
Sustainalytics is of the opinion that the Tele2 Green and Sustainability-Linked Financing Framework is credible and impactful and aligns with the four core components of the Green Bond Principles 2021 and Green Loan Principles 2021 (the “Use of Proceeds Principles”). The eligible categories for the use of proceeds – Energy Efficiency, Clean Transportation, and Renewable Energy – are aligned with those recognized by the Use of Proceeds Principles and will lead to positive environmental impacts.
Sustainability-Linked Instruments
Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2021
Sustainalytics is of the opinion that the Tele2 Green and Sustainability-Linked Financing Framework aligns with the Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2021 (the “Sustainability-Linked Principles”). Overview of KPIs and SPTs:
Selection of Key Performance Indicators (KPIs)
Sustainalytics considers KPI 1 and KPI 2 to be very strong given that, when assessed in combination, they represent direct measures of GHG emissions from Tele2’s own operations as well as its supply chain, through the purchase of goods and services and the use of sold products. In addition, both KPIs (i) represent a material environmental issue for the sector and the Company; (ii) are defined following clear and consistent definitions as per GHG Protocol Standard which supports benchmarking against external emission reduction strategies and (iii) are validated by SBTi.
Calibration of Sustainability Performance Targets (SPTs)
Sustainalytics considers the SPTs to align with Tele2’s sustainability strategy and considers Tele2’s SPT 1 to be highly ambitious given that the SPT aligns with the targets set by the Company’s peers and SBTi’s well-below 1.5-degree scenario. Sustainalytics notes that the performance trajectory necessary for Tele2 to achieve SPT 1 represents a lower rate of reduction than is seen in the Company’s past performance, it nonetheless considers this SPT to be ambitious given the Company’s broader context of historical emissions reductions, and the implied effort necessary for marginal emissions reductions as a Company’s GHG footprint approaches zero.
Sustainalytics considers Tele2’s SPT 2 to be ambitious given that it presents a material improvement compared to past performance and the SPT aligns with the targets set by the Company’s peers, and is considered to be ambitious as per the SBTi target validation report.
Bond Characteristics
Tele2 has disclosed that securities issued under the Framework will have financial penalties in the form of either a coupon step-up or an increase in the redemption price, tied to the Issuer’s achievement of the instrument’s SPTs. Such financial penalties will succeed a trigger event, defined by the Framework as being any of the following: i) Tele2’s KPI performance following short of the applicable SPT on the relevant target observation date, as defined by the respective security documentation; ii) insufficient reporting by Tele2 based on the reporting requirements outlined in the Framework; or iii) insufficient reporting on, and verification of, Tele2’s performance against the applicable KPI, in accordance with the Verification requirements of the Framework. Specific financial and structural characteristics of any security issued under the Framework will be described in its corresponding documentation.
Sustainalytics positively notes that all SPTs need to be met to avoid an increase in the coupon/interest rate.
Reporting
Tele2 will provide relevant reporting on the progress made with respect to the KPIs, and, in relation to any relevant reference periods, the achievement or not of the SPTs set out in the security specific documentation. The Company will make such reporting publicly available on an annual basis in a Sustainability-Linked Financing (SLF) Progress Report, and in any case relevant for assessing the KPI performances leading to a potential adjustment of the financial or structural characteristics of bonds issued under the Framework. Tele2 intends to publish the SLF Progress Report to its web page no later than the Reporting End Date, as outlined in the security specific documentation, after the end of the year and including the Reference Period. This reporting practice is aligned with the SLBP.
Verification
Tele2 commits to having an external verifier provide limited assurance against each SPT for each KPI at least once a year, which is aligned with the SLBP on verification. The Company intends to make public the verification report on its website together with the SLF Progress Report, no later than the applicable Reporting End Date, and in any case for an SPT related trigger event, as outlined in the Framework. This practice is aligned with market expectation.