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An S&P Global Second Party Opinion (SPO) includes S&P Global Ratings' opinion on whether the documentation of a sustainable finance instrument, framework, or program, or a financing transaction aligns with certain third-party published sustainable finance principles. Certain SPOs may also provide our opinion on how the issuer's most material sustainability factors are addressed by the financing. An SPO provides a point-in-time opinion, reflecting the information provided to us at the time the SPO was created and published, and is not surveilled. We assume no obligation to update or supplement the SPO to reflect any facts or circumstances that may come to our attention in the future. An SPO is not a credit rating, and does not consider credit quality or factor into our credit ratings. See Analytical Approach: Second Party Opinions.
Second Party Opinion
Terna's Green Bond Framework
July 9, 2025
Primary contact
Luis Solís
Madrid
+34 914 233 218
luis.solis @spglobal.com
Location: Italy Sector: Utility networks
Dark green
Alignment Summary Aligned =
See Alignment Assessment for more detail.
Activities that correspond to the long-term vision of a low-carbon climate resilient future.
Our Shades of Green Analytical Approach>
Strengths Weaknesses Areas to watch
No weaknesses to report.
Terna has ambitious emissions reduction targets for 2030. These targets are validated by the Science-Based Targets initiative (SBTi) as aligned with a 1.5ºC scenario and aim to reduce combined scope 1 and 2 emissions by 55% and scope 3 emissions by 28% from a
2019 baseline. Over 90% of Terna's scope 1 and 2 emissions relate to grid losses. Investments in grid infrastructure to integrate renewables, enhance transmission efficiency, and upgrade substations support reducing grid losses.
The company's reporting is very robust. Terna commits to preventing, managing, and reporting any potential controversies arising from the projects, which enables stakeholders to monitor any additional relevant aspects of project implementation. Also, the clear separation of investments into three distinct activities, along with the issuer's impact reporting on each project, makes it easier to monitor progress.
The Italian electricity grid--although on a decarbonization trajectory--is not yet considered fully low carbon. The decarbonization of the grid largely depends on electricity generation, which is beyond Terna's control. The eligible investments are key to reducing emissions and meeting EU climate targets.
Shades of Green Projects Assessment Summary
Terna structures its investments under the framework in three project categories in line with its 2025-2034 Development Plan. All categories fall under EU Taxonomy activity 4.9 Transmission and Distribution of Electricity.
The issuer has indicated that the allocation of proceeds across the Eligible Green Projects categories may vary with each issuance, depending on the specific projects financed. In line with the actual distribution observed in Terna's green bond issuances between 2018 and 2024, as reported in its 2024 Green Bond Report, the current breakdown stands at approximately 65% for renewable energy, 5% for energy efficiency, and 30% for quality, security, and resilience of electricity transmission infrastructure. For future issuances, the issuer anticipates a reduced allocation to energy efficiency projects, with a corresponding increase in the share allocated to the other two categories. This is why we expect is the majority of proceeds will be allocated to the renewable energy category, followed by activities related to quality, security, and resilience.
The balance between refinancing and new financing is also expected to vary depending on each issuance's timing, project maturity, and funding needs.
Based on the project categories' Shades of Green detailed below, the expected allocation of proceeds, and considering the environmental ambitions reflected in Terna's Green Bond Framework, we assess the framework as Dark green.
Renewable energy Dark green
Connection of renewable sources generation plants (grid infrastructures devoted to directly connecting grid generation plants from renewable sources to the transmission grid).
Integration of production from renewable sources, while enhancing grid stability (grid infrastructures that allow a higher inflow of production from renewable sources into the transmission grid, for instance by resolving congestions in a given portion of the grid).
Energy efficiency Medium green
Grid infrastructures that allow higher transmission efficiency (reduction of the difference between energy generation and consumption, other things being equal).
Quality, security, and resilience Dark to Medium green
Investments included in the National Development Plan, whose objective are the quality and security of the service (they mainly concern interventions to reinforce and mesh the network), to solve operational issues also related to the energy transition through the decommissioning of the thermoelectric plants and the integration of RES.
Investments in infrastructural interventions related to the construction of new lines or substations aimed at increasing the resilience of the national transmission grid in those areas of the Italian territory more exposed to severe climatic events (eg. strong wind and ice-snow).
See Analysis Of Eligible Projects for more detail.
EU Taxonomy Assessment Summary
In our view, Terna's eligible economic activities under the EU Taxonomy meet both the substantial contribution and do no significant harm (DNSH) criteria, and its procedures are aligned with the minimum safeguards.
The issuer intends to allocate an amount equal to the net proceeds to finance and refinance capital expenditure (capex) related to enabling activities under EU Taxonomy activity 4.9 Transmission and Distribution of Electricity in Italy. These projects are part of the interconnected European system. Terna uses its resilience methodology for identifying areas of the national transmission grid at higher risk of failure and load disruptions due to wet snow and strong wind events. The company, in line with Italian regulation, does not install new equipment with polychlorinated biphenyls (PCBs) in line with the pollution DNSH criteria and confirms that older transformers with PCBs have been removed. For biodiversity, Terna's eligible projects undergo environmental impact assessments to identify, assess, and mitigate any interference with surrounding ecosystems.
Economic activity
Expected allocation by 2028
Technical screening criteria (TSC)
Do no
Substantial
contribution
significant harm
Minimum safeguards (Issuer level)
Overall alignment
4.9 Transmission and distribution of electricity -NACE code: D35.12, D35.13
100%
Aligned =
See EU Taxonomy Assessment for more detail.
Issuer Sustainability Context
This section provides an analysis of the issuer's sustainability management and the embeddedness of the financing framework within its overall strategy.
Company Description
Terna is Europe's largest independent energy transmission grid operator, and is based in Rome, Italy. The company owns the national transmission grid, with more than 75,000 kilometers of high-voltage lines throughout Italy. It is responsible for energy transmission and dispatch across the country. Its activities are mainly domestic, predominantly regulated, and encompass grid operation, maintenance, and development under a long-term renewable concession. In addition, Terna has a few unregulated businesses, including the operation and maintenance of high-voltage plants, the housing of telecommunications equipment, fiber optic grid maintenance, and the production of electricity cables and transformers. At year-end 2024, the company had a regulated asset base (RAB, including work in progress) of €22.5 billion. State-owned Cassa Depositi e Prestiti (CDP) indirectly owns about 18% of Terna through CDP Reti, which owns 29.9% of the company. CDP Reti is a joint venture that is 59% owned by CDP and 35% owned by State Grid Corp. of China through State Grid Europe Ltd. The rest is owned by institutional investors.
Material Sustainability Factors
Climate transition risk
Climate transition risks are highly material to stakeholders but tend to have more bearing on electricity networks given their critical role in the energy delivery value chain and their direct exposure to upstream generators, which are a leading cause of greenhouse gas emissions. These drivers make the sector highly susceptible to growing public, political, legal, and regulatory pressure to accelerate climate goals and are highly relevant for stakeholders globally. The ongoing energy-sector decarbonization is expected to triple its reliance on renewables, which comes with significant grid expansion. This expansion faces the challenge of reducing leaks of SF6, a potent greenhouse gas in electrical transmission facilities. Addressing these leaks is crucial to reducing climate change impacts in the power transmission sector. Italy's climate goals place great emphasis on electrification and new green industries, thereby accelerating demand for renewable power.
Physical climate risk
Networks operate fixed assets that span large service territories, making them highly exposed to physical climate risks. These events can cause network service disruptions for large populations, elevating stakeholder materiality. Issuers have been impaired by wildfires, hurricanes, and winter storms. During these events, the utility may incur higher costs, which typically leads to higher leverage. Terna's entire operations are in Italy, which is subject to natural hazards like floods, storms, and droughts.
Biodiversity and resource use
Alongside climate risk, the loss of biodiversity is one of the major global challenges. The United Nations has designated 2021-2030 as the world's decade for the restoration of ecosystems. Transmission electricity activities involve interventions in nature and, given that it has infrastructure throughout Italy, reducing Terna's land use and biodiversity impacts is crucial. A lack of biodiversity considerations can lead to habitat loss, landscape fragmentation, and disruptions to species, undermining biodiversity and ecosystem services.
Impact on communities
Community impacts can be acute for stakeholders given how close networks typically are to where people live and work, and the essential role energy services play in community health and wellbeing globally. Stakeholders can be affected by the construction and siting of lines, especially in areas unaccustomed to industrial development. Construction is accelerating to meet climate
goals and where local governments have legal power to expropriate private land for energy activities. Moreover, service disruptions and fires pose severe, and sometimes irreversible, community health and safety hazards.
Access and affordability
Climate-related risks are pressuring the affordability and reliability of networks, in turn heightening the materiality for stakeholders. Energy is essential to human health and wellbeing and global economic development. Service disruptions or steep price increases are likely to be amplified by the energy transition and physical climate risks. These dynamics can affect households' purchasing power and the competitive strengths of local industries, which make access and affordability highly material for stakeholders. Moreover, while utility bills are rising, they tend to increase at a lower rate than inflation.
Issuer And Context Analysis
The eligible project categories address climate transition and physical climate risks, which are the most important material sustainability factors for Terna. The issuer's transmission and distribution of electricity focuses on new and upgraded grid infrastructure to integrate renewables, improve efficiency, and enhance security and climate resilience, aligned with Italy's carbon neutrality goals. The investments target grid development and asset renewal and network safety-reflecting exposure to climate and biodiversity risks, land use impacts, and effects on local communities. The issuer has robust procedures for managing its exposure to physical climate and biodiversity risks that could affect biodiversity and local communities.
Investment in the transmission of electricity plays a crucial role in decarbonization by facilitating the distribution of renewable energy sources and decreasing reliance on fossil fuels. The 2025 Development Plan for the National Electricity Grid provides for more than €23 billion in grid development investments over 2025-2034, a 10% increase on the previous 10-year plan. These investments are aimed at supporting the energy transition and achieving the environmental goals set by EU regulations over both the medium and long terms. This is especially relevant when, according to the IEA, investments in grids are struggling to keep pace with the rise in power demand and renewables deployment. Each year, some US$400 billion is now spent on grids worldwide, compared with around US$1 trillion on generation assets. These investments aim to increase Italy's energy generated from renewable sources to at least 65% of final consumption in the electricity sector by 2030, totaling more than 70 gigawatts (GW) of additional power (wind and solar) compared to 2021 (about 65 GW compared to 2023). As a result, this will enable the reduction of CO2 emissions by at least 55% by 2030 compared with 1990 levels.
Terna aims to become net zero across its value chain by 2050 by reducing emissions (scopes 1, 2, and 3) in line with the 1.5°C scenario. The issuer has set ambitious reduction targets for 2030, validated by the SBTi. It expects to reduce its scope 1 and 2 emissions by 46.2% by 2030 from a 2019 base year and its scope 3 emissions by 11.1% by 2030 from a 2021 baseline. With respect to scope 1 and 2, more than 90% of them are associated with grid losses. Through its 2025 Development Plan, Terna aims to reduce grid losses by between 0.4 terrawatt hours (TWh) and
1.0 TWh per year, thanks to infrastructure improvements. It is also promoting the connection of renewable energy sources: in 2024, it signed 33 connection agreements representing about 1,120 megawatts of new capacity. By 2030, Terna expects an increase of more than 65 GW in installed renewable capacity compared to 2023, and over 94 GW by 2035. Additionally, Terna is addressing SF6-related emissions (23,500 times greater than CO2) by enhancing leak monitoring and maintenance, promoting the adoption of SF6-free technologies-such as air-insulated and vacuum-interrupted equipment-for new installations, with the first experimental 145 kV systems planned for 2025. To reduce its scope 3 emissions (56% of total emissions in 2024), the issuer plans to use low-carbon-footprint technology and materials in the construction and operation of grids. Furthermore, it has strong supplier practices to manage its value-chain emissions.