Etihad Airways, the national airline of the United Arab Emirates, has raised US$1.2 billion in the first sustainability-linked loan (SLL) tied to environmental, social and governance (ESG) targets in global aviation.
The transaction is the largest sustainable financing in the airline’s history and follows two innovative aviation financing deals – a first-of-a-kind sustainability-linked transition sukuk in 2020 and a loan tied to the UN Sustainable Development Goals in 2019.
Adam Boukadida, Chief Financial Officer at Etihad Aviation Group, said: “Etihad Airways has spearheaded sustainable financing in aviation, and we are proud to continue our innovative track record by being the first airline to secure a sustainability-linked ESG loan. Financing our operations in a way that supports both our planet and the people in our local communities is the natural next step of our financing strategy.
“Our goals will have a real-world impact, and to underscore our accountability, we have committed to penalties and incentives of up to US$ 5.5 million linked to our progress against key performance indicators. Through our Greenliner programme, we are pursuing multiple sustainability-related initiatives at Etihad Airways to improve the environmental footprint of aviation, and green financing is a key part of our 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.
Etihad Airways 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 Coordinators, Joint Bookrunner and Mandated Lead Arranger. FAB also acted as Facility Agent.
Abdulfattah Sharaf, CEO, HSBC UAE & Head of International Markets, said: “HSBC is 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.”
Martin Tricaud, Group Head of Investment Banking, First Abu Dhabi Bank, 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.”
