The sustainability of our planet must be an objective for all countries, all industries, and all situations.
Making the right investments to impact not just a company's operations and results but society as a whole is a mission and a responsibility for any business, whether it is a local micro company or a multinational corporation. Operating in one of the most critical areas for decarbonization and sustainable development, EDP has been investing in Sustainable Finance for several years - in order to secure today, and every day, the necessary resilience for the future.
2006, a milestone for EDP and Sustainable Finance
It was in April 2006, following a challenge from the United Nations, that the Responsible Investment Principles were rolled out at the New York Stock Exchange, thereby coining an acronym - ESG (Environmental, Social, and Governance) - which now plays a crucial role in everyday business operations. It was also in 2006 that EDP decided to focus on renewable energies - a strategic decision that prefigured a change major international players would make only several years later.
Sustainability is both the present and the future, but at EDP this became a reality nearly two decades ago, when the company took the first steps to enter the Dow Jones Sustainability Index, rated by Standard & Poor's - a target the company would achieve in 2008. EDP is now one of the leaders in that index, as well as the only Portuguese company to be listed there for 13 years in a row. The company is also included, again positive scores or risk levels, in several other international rankings and assessments, such as Sustainalytics, MSCI, Ethibel, FTSE4Good, and Euronext Vigeo Eiris.
Relentless integration of ESG factors
To ensure a constantly positive and ever-improving performance, ESG factors (Environmental, Social, and Governance) are always included in the various EDP operations, in accordance with the commitments set out in the UN Sustainable Development Goals. All segments of the value chain contribute to strengthening Sustainable Finance.
Environmental - In addition to decarbonization strategies, divestment in fossil fuels up to 2030, increased energy efficiency, and initiatives pertaining to biodiversity and the environment, EDP wants to reduce waste production by 85% up to 2025. Other commitments taken on by EDP include mitigating the environmental impact of all new projects, refusing to produce energy within UNESCO natural heritage sites, and eradicating environment-related accidents.
Social - Investing in local communities and energy access, reducing workplace accidents and focusing on customer satisfaction are some of the parameters comprised in the ESG social component. But it also includes investing in diversity and inclusion, with full employee integration and a positive contribution to society.
Governance - Keeping EDP in line with the best responsible investment practices requires incorporating all financial information recommendations, creating climate change adaptation plans in known risk areas, improving transparency and anti-corruption practices, and upholding EDP's reputation as one of the most ethical companies in the world. And, in addition to all this, engaging and influencing all stakeholders in our constant pursuit of sustainability.
Materiality helps EDP find the most relevant issues
For EDP, it is crucial that the vision and positioning of all stakeholders contribute to the company's sustainability strategy. All EDP stakeholders (divided into four groups: Market, Value Chain, Democracy, and Social and Territorial Context) have different ambitions and visions, but they all contribute to EDP's overall sustainability vision, leveraging the company's competitiveness and positive impact - always in line with ESG factors.
One of the tools that help us build this strategic vision is the Materiality Process, a mechanism through which we identify Material Issues - that is, those that are considered most relevant to the various stakeholders. Following this identification, the company's strategic plan is optimized and internal managers are instructed to address and comply with such Material Issues. 60 issues in 21 categories were identified in 2020; these were organized into three major sections - Economic, Social, and Environmental, all of which are relevant to the company's operations and society. The matrix that brings all elements together is a mirror of what EDP already is and intends to continue being.
EDP Green Bonds for a greener future
Sustainable financing is increasingly decisive for companies and investors' choices. Green bonds, or green debt securities, are a crucial tool for encouraging the transition of the business world to energy efficiency models, reducing carbon emissions, and sending the market a message of change. Issuing green bonds requires commitments to the planet, but it also helps frame new or existing projects within a sustainability strategy.
As an energy utility that aims to produce 100% renewable electricity by 2030, EDP is particularly exposed to the challenges of decarbonization, but also fully committed to ensuring a smooth transition for companies and society. In October 2018 EDP became the first Portuguese listed company to issue green bonds, worth €600 million, which were then used for designing and building wind and solar farms.
Since then the company has carried out nine bond issues, the last of which held in September 2021: a "dual tranche" subordinated debt issue for a total amount of EUR 1.25 billion. All debt placements are aligned with EDP's Green Bond Framework, created in 2018 for the first issue, and are intended for the financing or refinancing of renewable projects.
A reinforced commitment
In 2021, before the disclosure of the 2020 EDP Sustainability Report, a new Environmental Policy was approved, restating the group's nine commitments to sustainable development across the board. This requires intervening (internally and externally) in the market and in society, ensuring transparency and Sustainable Finance, and securing capital flows to help achieve a more environmentally friendly and climate-resilient economy.
EDP's sustainability strategy is a page that is never blank and which is always being rewritten. For the sake of a greener planet, which requires a combined effort by all organizations - both public and private - whether for managing everyday life or taking long-term decisions, as well as the engagement of individuals and communities in the choices they make and the principles they adopt. Sustainable Finance is one of the main instruments of change towards a fairer society and economy.
Now or Never
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