Last year we published a post on the European Union’s new commitment to green finance; the Taxonomy Regulation. We explained the functioning of this regulation, as well as the uncertainty it presented for the consideration of the deployment of next generation networks as an eligible activity. Throughout this time, the situation has changed.
The Draft Notice on the interpretation and implementation of the Taxonomy published by the European Commission clarified that telecommunication networks as such are not included as an activity in the current scope of the Climate Delegated Act, but rather specific aspects such as the use of connectivity infrastructure for communication between devices or infrastructure upgrades to support the connectivity needs of the digital solution. Therefore, what was once uncertainty regarding the potential inclusion of networks was conformed as their exclusion from the Taxonomy in its current configuration.
Against this backdrop, we want to highlight the role of networks in decarbonization, as well as Telefónica’s track record in green finance over the years.
Decarbonization enabled by telecommunications infrastructure
Despite the fact that data traffic flowing through the network has increased by a factor of eight, Telefónica has managed to reduce its energy consumption by 8.6%, compared to 2015. This has been possible thanks to the continuous upgrading of the telecommunications infrastructure.
On the one hand, the deployment of new generation networks is more energy efficient. The 5G mobile network is up to 90% more efficient than the previous generation, while in fixed networks, fiber is up to 85% more efficient than copper. In parallel, the shutdown of inefficient legacy networks is being promoted. For example, Telefónica has shut down more than 5,000 copper sites by 2024 and plans to close the remaining 3,000 by the end of the year.
In addition, the company is working on modernizing its equipment. Not only is the equipment being renewed by integrating more efficient technological innovations in electrical and air conditioning infrastructures, but also Power Saving Features (PSF) systems are being used to optimize energy consumption during low traffic periods. For example, the PSFs implemented by Telefónica have made it possible to reduce energy consumption by up to 30% during these low-demand hours, without compromising the quality of service.
Finally, Telefónica not only promotes sustainability in its telecommunications infrastructure, but also in other sectors thanks to the enablement effect that digital and connectivity solutions offer. The company has helped its customers avoiding the emission of 81.7 million tons of CO2. These solutions are certified with the Ecosmart label, verified by AENOR, guaranteeing their contribution to saving energy, water, CO2 emissions and promoting the circular economy.
Telefónica as a driver of green finance in the telecommunications sector
For several years, Telefónica has been actively working to integrate ESG (Environmental, Social and Governance) criteria into its financing model. In November 2018, the company launched its first sustainable financing framework, which was updated in January 2021 with validation from Sustainalytics, an independent third party. This framework is aligned with the United Nations Sustainable Development Goals and the Green, Social and Sustainable Bond Principles established by the International Capital Markets Association.
Since the issuance of its first green bond in January 2019 and its first hybrid green bond in January 2020, Telefónica has issued €2.85 billion in green bonds and €4.75 billion in hybrid bonds. The funds raised through this framework have been earmarked for three types of projects: the transformation and modernization of telecommunications networks, both fixed and mobile, with the aim of improving their energy efficiency; the implementation of Telefónica’s Renewable Energy Plan; and the development of digital products and services designed to promote energy and natural resource savings. These projects represent key levers for increasing operational efficiency and reducing the carbon footprint of the company and its customers.
Telefónica has committed to linking ESG criteria to 40% of its total financing by 2026, reinforcing its goal of aligning environmental and financial sustainability.
Taxonomy’s role in accelerating the deployment of efficient next-generation networks
Europe has achieved approximately 80% coverage in 5G networks and 63% in fiber. To fully unleash the decarbonizing potential of next-generation networks, it is crucial to work towards 100% coverage of next generation networks. However, telecom operators face an investment gap of up to €200 billion to achieve this goal.
In this context, green finance is positioned as a key tool. Considering that the Taxonomy Regulation seeks to establish itself as a new standard for green finance, it is crucial that it recognizes the decarbonizing role of the most efficient next-generation networks. Failure to do so would slow down deployment, affecting both climate neutrality and digital targets.
In our next publication, we will share Telefónica’s proposal to include the deployment of next generation networks in the next Taxonomy Delegated Act as part of our contribution to the European Commission’s consultation.
