Sustainability finance comes to aviation

Christchurch International Airport converts debt facility into its first sustainability linked loan; Leonardo signs ESG-linked term loan

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Airlines like Cathay Pacific are hoping sustainable aviation fuel can be scaled up to help cut carbon emissions. (PHOTO: Via Cathay Pacific)

New New SingaporeChristchurch International Airport Limited (CIAL) said it has successfully completed the re-financing of an existing debt facility with Westpac, at the same time converting it into its first sustainability linked loan.

An aerial view of Christchurch International Airport. (PHOTO: By CHCBOY)

Chief Financial Officer Tim May says signing its first Sustainability Linked Loan with Westpac is a milestone achievement that financially incentivises the airport to meet agreed sustainability targets. This is not a new loan, but the first step in CIAL taking the opportunity to incorporate its ambitious sustainability targets into its financial strategy.  Conversion of other existing facilities will be considered as they mature over time. “This is another way Christchurch Airport is demonstrating a sincere commitment to sustainability. Rather than just rolling over some maturing facilities on the same terms, we’re putting our money where our mouth is,” May said.

The Sustainability Linked Loan means the financial terms of the Westpac loan are linked to whether the airport achieves its ambitious goals for carbon reduction, renewable energy generation on its campus and energy efficiency. The airport’s progress will be subject to independent scrutiny and if it achieves its targets, it will receive lower funding costs in respect to this facility. If it doesn’t, this facility will be charged at a higher interest rate.

“Yes, they may be ambitious, but we back ourselves to achieve our agreed SLL targets – alongside the many goals we’ve set and achievements we’ve made in sustainability. That includes being the first airport in the world to achieve the highest level of carbon reduction for an airport,” said May. “We know many stakeholders are becoming increasingly interested in companies demonstrating commitment to sustainable outcomes. Converting this facility with Westpac allows us to join several other leading businesses who’ve already shown their focus on championing sustainable finance practices in New Zealand. Our airport team daily demonstrates best practice in sustainability, so has made it possible for us to commit to this refinancing. Every member of our team has an impact on sustainability outcomes. That has given our finance team confidence to sign up to the Sustainability Linked Loan and we’d like to thank Westpac for their support of this re-finance move.”

Westpac NZ Head of Sustainable Finance Joanna Silver says the financial incentives associated with this type of lending mean sustainability stays front and centre of an organisation’s thinking. “It’s great to see companies like Christchurch Airport putting sustainability at the heart of their balance sheet,” she says. “It keeps them focussed on the things they want to achieve and sends strong, positive signals to customers, employees and shareholders.”

Leonardo signs ESG-linked term loan
Leonardo announced it has signed a new ESG-linked Term Loan Facility, with a club of domestic and international banks, amounting to €600 million with a maturity of five years and expiring at the beginning of 2027, for the purpose of refinancing bonds maturing in January 2022. The credit line is linked to specific ESG indicators – which are contained in the ESG-linked Revolving Credit Facility (RCF-ESG-) signed on 7 October – including the reduction of CO2 emissions through the eco-efficiency of industrial processes and the promotion of the employment of women with degrees in STEM disciplines. 

The objectives linked to these ESG indicators will contribute to the achievement of the Sustainable Development Goals (SDG) which are the basis of approximately 50 percent of the group’s investments. The achievement of the targets linked to the ESG indicators will also activate a margin adjustment mechanism applied to the facility. 

Alessandro Profumo, Leonardo’s CEO, said “With the signing of this credit line, 50 percent of Leonardo’s sources of financing are now ESG-linked. This confirms our commitment to sustainability, an integral part of Leonardo’s Industrial Plan and Long-Term Incentive Plan, and the importance we place on sustainable finance. We are taking advantage of current market conditions to sign this credit line in order to re-finance a bond near to the maturity, a further step forward in the Group’s disciplined financial strategy.”

The ESG Term Loan has been subscribed by the following banks: Mandated Lead Arrangers and Bookrunners: Banco BPM, BNP Paribas (BNL Lender), BPER Banca Corporate & Investment Banking, Crédit Agricole CIB, Intesa Sanpaolo (IMI – Corporate & Investment Banking Division), UniCredit. UniCredit has assumed the role of Documentation Agent and Intesa Sanpaolo (IMI – Corporate & Investment Banking Division) will assume the role of Facility Agent. For the signing, the club of banks has been assisted by Linklaters and Leonardo by Clifford Chance as legal advisors.

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