At the end of November, Italian energy infrastructure group Snam announced that it had earmarked up to €23bn for investments in energy networks, storage and renewable sources. The group aims to have 80% of its funding covered by sustainable finance products by 2025, up from the current 60%.
Chief financial officer Alessandra Pasini talked to The Banker’s sister publication, Sustainable Views, about the importance of energy storage, repurposing existing infrastructure for the transportation of green energy (which would come at a fraction of the cost of building new ones), and how environmental, social and governance (ESG) factors affect capital decisions.
Q: Does a detailed sustainability plan make a difference with investors?
A: It does; however, we still mostly focus on the ‘E’, rather than the ‘S’ and the ‘G’ of ESG, even as we see equity and debt investors’ interest moving toward the other two areas.
We can engage with stakeholders to define standards and understand the costs of the transition to green so that they don’t hit the most vulnerable people the most
Clearly, having a good track record of financing of projects in line with ESG principles makes a difference — we have seen this at Snam in terms of the feedback we receive from investors. At least 40% of our equity is ESG-linked or complies with socially responsible investing screening. In terms of debt, if we include the transition bonds that we have issued over the past few years, that ratio is much higher. [Snam has tapped the market four times between 2020 and 2021 for a total value of €2.35bn in an effort to finance its 2040 net-zero goals.]
We created an advisory council on ESG two and a half years ago. We serve a public utility function through energy infrastructure and we need to do our job with precision, because the businesses and households that need heating depend on it.
But we can also play a role in promoting green energy. And we can engage with stakeholders to define standards and understand the costs of the transition to green so that they don’t hit the most vulnerable people the most.
Q: Which are the most important stakeholders in these conversations?
A: Certainly the EU, not least because of its work on the taxonomy, which is something we have monitored for three years now. It is transpiring that natural gas can be considered a transition fuel, but we also need to prepare ourselves for the future use of other fuels like green hydrogen.
It is also true that the private sector is emerging as a force for change. If regulatory incentives are well structured, markets get going. But there are businesses that have begun to decarbonise even in an uncertain regulatory environment.
Q: Would you like more regulation, so that everyone plays by the same rules?
A: Being coherent helps. What is green in Europe should be green elsewhere too.
It is also important to look at carbon pricing in a coordinated way, globally — we like what the UK and Germany are doing in this area. Even without one single mechanism for carbon pricing in the world, having similar approaches across countries will lead to a similar outcome.
Q: Is offsetting helpful or harmful?
A: It is a way to move towards the goal. A decarbonisation process that doesn’t allow for offsetting carbon emissions would be more virtuous. But you need to get there — you need to give companies time to get there.
At Snam we have launched Arbolia, a not-for-profit organisation that plants trees. This kind of offsetting is recognised in emerging markets, but not here in Italy — it’s a shame.
Q: What should we learn from this year’s natural gas crisis?
A: It has highlighted the need to invest in energy storage. Italy has always had high levels of gas storage and our facilities are the fullest in Europe. We enter winter with relative calm, compared to other countries. We also need to look to green hydrogen as a way of storing renewable energy using existing infrastructure. [As part of its 2030 investment plan, Snam aims to offer an international green energy storage platform and to invest €12bn in the part of its network that can already transport hydrogen and €3bn to repurpose an existing network to connect Italy to countries with higher demand, such as Germany.]
This would mean accelerating the transition, as repurposing existing infrastructure comes at a fraction of the price of building new one. Hydrogen also gives the flexibility of use and transportation that other renewable energy sources can’t provide.
The interview has been edited for clarity and brevity.
