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    Canadian oil and gas pipeline company Enbridge Inc. is pitching investors its sustainability-linked bond framework this week and receiving mixed reviews from analysts.

    The proposal, the first by a North American pipeline operator, is a litmus test for the fast-growing ESG investment product that Wall Street is hoping will fuel a bond issuing boom.

    Unlike green bonds, which earmark proceeds for particular projects, sustainability-linked bonds require that borrowers hit environmental and social targets or face financial consequences, such as an increase in the interest rate of the bonds. Enbridge is proposing to issue bonds that could pay higher interest rates or fall due earlier if the company fails to reduce greenhouse gas emissions by 35% by 2030 and to increase racial and gender diversity in its workforce and board of directors.

    The proposal has clear targets to be reported annually and received a positive second-party opinion from consultant ISS ESG, according to a research report by Barclays PLC.

    But the bonds have fairly large blind spots including the lack of penalty for leaks and spills, a much greater environmental risk for pipeline operators than emissions, Barclays said. One of Enbridge’s pipelines flowing through Michigan has become a political hot potato because of alleged environmental dangers.

    Enbridge is also proposing its emissions reduction be calculated off a 2018 baseline, giving itself a head start because it has already cut them by 25% since then, according to Barclays. The targets are modestly material to Enbridge because they exclude so-called Scope 3 emissions—from companies that burn the gas Enbridge ships, for example—according to ISS ESG’s second-party opinion.

    Comparable bonds issued by Italian energy company Eni SpA this month included Scope 3 emissions in their targets, Barclays said.

    “Our sustainable financing framework provides transparency to our stakeholders and positions us well to succeed in leading our industry to a more sustainable and inclusive energy future,” Enbridge Chief Financial Officer Colin Gruending said in a statement.

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