Spain-based telco Telefónica will allocate more than three-quarters of a billion dollars to fund sustainability-focused network infrastructure projects, bringing its total sustainable financing to more than $15.5 billion since 2019. The network operator also published an environmental lifecycle analysis of its connectivity offerings to reinforce its commitment to reach net-zero greenhouse gas (GHG) emissions by 2040.

Telefónica is no stranger to the environmental bond market and claims to leads the telecom sector globally in sustainable financing. The network operator last May issued a $1 billion senior sustainable bond, which is a fixed-income instrument backed by the issuing company’s balance sheet that carries the same credit rating as the issuer’s other debts. Sustainable bonds allows enterprises to raise capital to pursue both environmental and socioeconomic initiatives.

The environmental aspect of sustainable bonds “provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment,” explained Gartner Research VP Moutusi Sau. In this way, growth in the green and sustainable bond markets also indirectly works to disincentivize high carbon-emitting projects.

Sustainable bonds are slightly different from green bonds, which tend to focus only on environmental efforts and impacts. Telefónica's latest venture into these markets is with the issuance of a six-year green hybrid bond worth more than $777,000.

Issuing a hybrid green bond – which counts as 50% capital according to major rating agencies' methodologies and contributes to maintaining the issuing company's credit rating – was well received by institutional investors and allowed for a more broadly diversified investor base, according to the operator.

The funds gathered from the bond's issuance will go toward the operator's investments in "green projects" like decommissioning legacy equipment and deploying improved network infrastructure. Projects funded by this bond will aim to increase the energy efficiency of Telefónica's network through deploying fiber and 5G technology and funding renewable energy generation.

Projects will be identified with the help of the operator's sustainable finance framework, and the company will report on energy consumption per petabyte (PB) of data traffic and the represented energy and carbon emissions savings.

To that point, Telefónica says its shooting for more than 100% renewable energy in its main markets by contributing self-generated renewable power and facilitating the construction of new renewable energy operations via power purchase agreement (PPA) models.

Telefónica's lifecycle analysis of its connectivity offerings concluded that transitioning its network infrastructure to fiber provides an 94% decrease in the environmental impact per PB of fiber-to-the-home (FTTH) compared to copper networks.

The operator credits those savings to its efforts in energy efficiency, sustainable design, integrating new and sustainable technologies, and investing in renewable energy. These results, validated by AENOR, support the company's plan to roll out FTTH connections and continue to transition its networks away from copper.

The analysis also showed the environmental impact of 4G and 5G networks is seven-times less than 2G and 3G networks, thanks to lower and more efficient consumption of energy during data transport and processing across 5G networks.