Monday, June 27, 2022

Etihad raises $1.2bn, the first aviation-sustainability-linked ESG loan

UAE’s national airline Etihad Airways has raised $1.2 billion in the first sustainability-linked loan (SLL) tied to environmental, social and governance roles, namely to reduce CO2 emissions, promote female participation in the workforce and increase corporate governance.

The transaction is the largest sustainable financing in the airline’s history and follows two innovative aviation financing deals – a first-of-a-kind sustainability-linked transition sukuk in 2020 and a loan tied to the UN Sustainable Development Goals in 2019. The deal is the airline’s third sustainable financing transaction as it pledged in 2020 to reach net-zero carbon emissions by 2050.

On the deal, Chief Financial Officer Adam Boukadida said: “Etihad Airways has spearheaded sustainable financing in aviation, and we are proud to continue our innovative track record by being the first airline to secure a sustainability-linked ESG loan.”

“Financing our operations in a way that supports both our planet and the people in our local communities is the natural next step of our financing strategy. Our goals will have a real-world impact, and to underscore our accountability, we have committed to penalties and incentives of up to $5.5 million linked to our progress against key performance indicators,” he stated.

Boukadida pointed out that through its greenliner program, Etihad is pursuing multiple sustainability-related initiatives to improve the environmental footprint of aviation. Green financing, he said, was a key part of the airline’s strategy.

The loan terms are linked to multiple Key Performance Indicators (KPIs) that are tied to the following ESG initiatives and will be independently assessed:

Environmental – Reducing the carbon emissions intensity of the passenger fleet, as measured in terms of CO2 emissions per revenue tonne kilometres. As part of its iconic Greenliner Program, Etihad Airways has committed to an ambitious target of net zero carbon emissions by 2050 and has set key milestone goals for 2035 and 2025.

Social – Etihad Airways has established the Global Business Service Solution (GBSS) centre in Al Ain, UAE, to contribute towards the socioeconomic development of the community and to increase employment and upskilling of Emirati women in the aviation sector. This KPIs will measure both female participation and ongoing training and development.

Governance – Etihad Airways upholds the highest standards of corporate governance, ethics and integrity. This KPI will be linked to the Integrity Score, a comprehensive measure used to assess the overall internal culture of integrity at the airline.

 The Abu Dhabi carrier had selected HSBC and First Abu Dhabi Bank (FAB) as the strategic partners and financiers for this transaction. HSBC and FAB acted as joint ESG structuring banks, joint ESG co-ordinators, joint bookrunner and mandated lead arranger. FAB also acted as facility agent.

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