As an early proponent of clean energy and sustainability, Italy-based global power company Enel Group began investing heavily in renewables decades before the technologies became viable[1]. Today, the innovative multinational generates more power through its renewable energy sources than through its thermal plants—a tipping point it reached in 2019, much sooner than expected.

With a renewed focus on becoming fully decarbonized, Enel, the world’s largest private renewables player, is paving the way for a sustainable future. Just over a year ago, the Group introduced the concept of sustainability-linked bonds (SLBs) to credit markets. Unlike green bonds, SLBs are linked to the sustainability strategy of a company, rather than just a single project, and they are structured to pay out a higher coupon if the company reneges on meeting specified key performance indicators linked to the United Nations’ Sustainable Development Goals (SDGs).

“As the world evolves more into a circular and sustainable economy, it makes sense that financial instruments are tailored to that direction.”

Francesco Starace, CEO, Enel

Speaking at the 2020 Bloomberg Green Festival last month, Enel CEO Francesco Starace laid out why this financing strategy matters for the bigger picture: “We’re looking at sustainability, not just green energy—it’s a little larger. As the world evolves more and more into a circular and sustainable economy, it makes sense that financial instruments are tailored to that direction.”

As part of its commitment to that path, the company will only bring sustainability-linked bonds to the market moving forward, and will no longer issue conventional bonds, according to Starace. This decision reflects the degree to which the group holds itself accountable to its sustainability goals, and at a remarkable scale: more than 90% of Enel’s $33.65 billion capital expenditure for 2020–2022 is aimed at achieving four of the U.N.’s SDGs.

Setting a Precedent for Sustainable Finance

Enel’s ongoing strategy confirms its position as a pioneer in sustainable finance, with other companies outside the energy sector having since followed suit.

Last month, Brazilian pulp and paper company Suzano issued its first SLB[2] in line with company-wide ambitions to reduce greenhouse gas emissions. September also saw Swiss pharmaceutical giant Novartis announce the pricing of a $2.17 billion SLB[3] linked to its targets for patient access in low- and middle-income countries. In the same week, fashion house Chanel unveiled an inaugural €600 million ($707 million) bond linked to environmental sustainability targets; the bond includes a penalty if the company doesn’t live up to its green goals.

The importance of aligning corporate finance strategy with sustainability goals to achieve real social and environmental change cannot be overstated. At the end of last year, the U.N. Global Compact established the CFO Taskforce for the SDGs—a global group of CFOs responsible for annual investments worth $14 trillion—dedicated to establishing a framework to ensure corporate finance and investments act as real drivers of sustainable growth.

Alberto De Paoli, Enel’s CFO, is at the forefront of this effort. As taskforce Co-Chair, De Paoli is leading actionable change to generate real-world impacts in line with the SDGs. Last month, he participated in the Global Launch of the CFO Principles for Integrated SDG Investments and Finance, a set of principles that provide detailed guidance on how companies can align their corporate finance strategies to sustainability commitments.

The principles represent best practices across four SDG areas—impact and measurement, strategies and investments, integrated corporate finance, as well as communication and reporting—that serve as essential components in SDG-aligned investments.

“The U.N. Global Compact CFO Principles for Integrated SDG Investments and Finance represent a solid first step to guide companies in the adoption of credible finance strategies that fully integrate sustainability toward the achievement of the SDGs,” stated De Paoli.

The task force is the first of its kind to initiate a dialogue among the global CFO community, investors, financial institutions and the U.N. in order to work collectively toward shared sustainability goals.

“Digitizing the way we operate our assets and the way we engage our customers has increased our adaptability.”

Carlo Bozzoli, Chief Information Officer, Enel

A Cultural Paradigm: The Digital Utility

In 2015, Enel made the strategic decision to future-proof its business operations by investing in digitalization. A large transformation plan supported by relevant investment (over $5.5 billions from 2017 to 2019). As a result, today 100% of Enel generation assets are remotely monitored, the renewable fleet is almost entirely remotely managed, over 45 million smart meters have been deployed while thousands of distribution network components are remotely controlled.

“Digitizing the way we operate our assets and the way we engage our customers has increased our adaptability,” says Carlo Bozzoli, Global Chief Information Officer, Enel. "This approach has been crucial also to navigate uncertain times like the ones we are living nowadays.”

Customer operations and interaction channels are fully digitized. Furthermore, the shift to Cloud of 100% of Enel’s applications data from operations (completed in April 2019, the first among the major world utilities) has been a key step towards the adoption of a platform-based model, supporting cost savings while maximizing the impact of innovation by supporting the company in facing the pandemic emergency as much of its workforce has operated remotely.

“We had 37,000 of our 70,000 employees working from home across 21 different geographies within 10 days,” Starace shared during his speech at a U.N. Global Compact event in April (Covid-19: Sustainable Finance and the Future of the Global Economy). Despite the pandemic’s disruptions, Enel’s customers have continued to seamlessly access its platforms and interact with the company as a result of its customer-centric focus at the heart of its digitalization strategy, which includes the platformization of all customer-related activities.

Enel’s multi-year process of standardizing previously fragmented IT platforms and migrating everything to the cloud—an essential prerequisite for speedy access, reliability and agility—has streamlined business processes across geographies, business lines and cost centers. “This allows a new and so far unthinkable level of standardization, and platform-based models that support new efficiency targets and allow faster deployment of innovation,” Starace explained during his speech at the Group’s Capital Markets Day in November 2019.

Enel will share details of its new strategic plan—hosted virtually for the first time ever—on November 24 at its 2020 Capital Markets Day.

The Group’s evolution to a platform-based model has enabled the efficiency and flexibility that underpins its operational sustainability, as it continues to provide reliable energy to 74 million businesses and households worldwide in a new operating environment shaped by the pandemic.

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Enel Continues to Lead the Way Toward a Sustainable Future