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How Etihad Covered all Three ESG Elements in One Sustainability-Linked Financing

Etihad Airways recently raised US$1.2bn in the first sustainability-linked loan in global aviation with terms that relate to all three areas of ESG. Here, Adam Boukadida, Chief Financial Officer, Etihad Aviation Group, gives TMI the lowdown on the ground-breaking transaction, and outlines future plans for an even more sustainable operation and an increasingly diverse team.

It’s no secret that ESG-related financial instruments are becoming increasingly popular across a wide range of treasury activities. Nevertheless, it is still relatively rare to find examples where all three pillars of ESG are addressed simultaneously. But now Etihad Airways has landed a $1.2bn sustainability-linked ESG loan that does precisely that. Secured in October 2021, the financing was not only an industry first, but also the first sustainability-linked loan in the region to include KPIs covering every ESG pillar.

While this is the largest sustainable financing that the airline has undertaken to date, it is no stranger to this form of finance. In December 2019, Etihad announced it had raised $100m in funding linked to the 17 UN Sustainable Development Goals, while in October of the same year, it issued the first-ever aviation Transition Sukuk, which raised $600m. This latest financing takes the company’s sustainable-related funding to almost $2bn – all in the space of a couple of years.

Terms of the deal

The loan itself has a two-element structure: the first part is for $500m over four years, while the second is for $700m over five years. The loan terms are linked to multiple KPIs that are tied to ESG initiatives which will be independently assessed at least once a year: