Etihad scores a first with loan tied to UN sustainability goals

December 10, 2019
Etihad Emissions
An Etihad Boeing 787

Etihad Airways has become the first airline to fund a project with a commercial loan based on United Nations Sustainable Development Goals.

The Abu Dhabi-based carrier linked the expansion of an “eco-residence” cabin crew apartment complex to two UN goals — affordable and clean energy as well as industry, innovation and infrastructure — to qualify for the 100-million euro loan.

By doing so, it receives a lower interest rate on the loan from the outset but the bank reserves the right to increase the cost of the funding if it is no longer in compliance with the UN framework.

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The prospect of cheaper money, as well as the kudos of having an ethical loan that recognizes efforts to boost sustainability, is making these types of arrangements more attractive to airlines and airports.

The Etihad arrangement differs from some other sustainability-linked loans because it is based on multiple goals rather than a single requirement such as a reduction in emissions and covers a range of projects that must meet the UN requirements.

Etihad Aviation Group senior vice president treasury, tax & finance Adam Boukadida said the process to secure the loan hinged on a detailed international verification of the airline’s sustainability credentials.

“This assessment will enable us to fund long-term leases of the new Eco-Residence complex, located in Abu Dhabi’s Masdar City innovation precinct, and will serve as the foundation for Etihad to fund future sustainable initiatives,” he said

“It will also highlight the growing specialization of Abu Dhabi as a center of excellence for financing sustainable projects, at a time of increasing global demand for ethics-based development.”

To support the financing, Etihad established a Sustainable Development Financing Framework that specified a range of projects for which funding can be provided and which must be linked to one or more of the Sustainable Development Goals.

Etihad said it had identified seven priority categories: green buildings, investment in women, biofuels, reduction of carbon footprint, humanitarian efforts. wildlife protection and waste management and recycling.

The group also engaged Sustainalytics to review its framework, confirm alignment with international sustainability bond principles and verify its sustainability credentials.

“Our decision to seek an independent review of our credentials demonstrates our commitment not only to sustainable development but also to ensuring that we exercise global best practice,” Boukadida said.

“The funding we have secured for this major project through our partnership with First Abu Dhabi Bank and Abu Dhabi Global Market is not only the first in global aviation but also one of the first in the Middle East region.”