Snam scooped the Transition bond of the year award for its first EU Taxonomy-aligned transition bond, which it hopes will lend "credibility" to an instrument it considers an "important pillar" of the sustainable finance market.

The four-year €300 million ($326 million) bond was recognised by judges for its ground-breaking alignment with the EU Taxonomy. Snam told Environmental Finance that this alignment is "highly innovative" in the market and "continues to attract positive feedback from investors and the overall market".

As well as mapping the transition bond use-of-proceeds to EU Taxonomy 'green' goals, Snam said the bond issuance also complies with the Do No Significant Harm (DNSH) and Minimum Social Safeguards (MSS) elements of the Taxonomy regulation, as set out in its framework.

With a lack of clear definitions, however, Snam told Environmental Finance that transition bonds continue to face additional challenges compared to green bonds in order to overcome "concern and misinterpretation" from investors.

The company added that it hoped that EU Taxonomy alignment – as well as disclosure against the Climate Transition Finance Handbook administered by the International Capital Market Association (ICMA) – will help provide "further credibility" for the still relatively small transition bond market.

"We firmly believe that the transition bond concept remains an important pillar of the sustainable finance market, as it can provide additional transparency around how capital allocation can support the transition and decarbonisation pathways, especially in the energy and emission intensive sectors," Snam said.

The EU Taxonomy-aligned transition bond continues the pioneering work the Italian energy infrastructure company has done around 'transition'-focused bond labels.

After issuing its ground-breaking 'climate action' bond in 2019, the firm kick-started its award-winning transition bond issuance in 2020 and issued a sustainability-linked bond in 2022. According to Environmental Finance Data, Snam has raised €4.7 billion from nine sustainable bonds – of which €2.7 billion has been through transition bonds.