October 16, 2021 aviation
Etihad raises $1.2bn in debut 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 (ESG) targets in global aviation.
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 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.
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 programme, 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 Programme, 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.
Abdulfattah Sharaf, the CEO of HSBC UAE & Head of International Markets, said: 'We are committed to helping lead the transition to a net zero carbon economy and we’re mobilising finance and accelerating innovation to make this happen, working in partnership with our customers to realise the opportunity to build a more sustainable, resilient, and prosperous future.'
'This is our second sustainability-linked transaction with Etihad, sending a strong signal that two global companies with leading UAE businesses – such as HSBC and Etihad – are committed to working in partnership to find innovative ways to finance industry while also protecting the planet,' he added.
FAB Group Head of Investment Banking Martin Tricaud said: 'We would like to congratulate Etihad Airways on the closing of this landmark sustainability- linked loan transaction. As a strategic partner and financier to Etihad in this transaction, FAB has demonstrated its sustainable financing expertise and contributed to the transition towards sustainability across the aviation sector.'
'As the UAE’s largest bank, we play an active role in supporting the economy, environment and communities that we operate in. We recognise the importance of the benefits and opportunities that can be brought about through sustainable finance. FAB is committed to empowering the UAE’s priority sectors to grow and become more sustainable through our impactful finance solutions,' he added.
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