Aeroporti di Roma (ADR), the manager and developer of Rome Fiumicino and Ciampino airports, announced the completion of a new 10-year €400 million sustainability-linked bond (SLB), with the cost of debt on the bond tied to a series of the airport operations group’s climate-related goals.
This offering follows ADR’s issuance of the world’s first SLB by an airport operator in 2021 and its inaugural Green Bond in 2020. With the new issuance, the group’s sustainable debt share now exceeds 60%.
ADR published an updated Sustainability-Linked Financing Framework in 2022, outlining the Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) to be used in sustainability-linked issuances, and trigger events that cause a step-up in debt cost.
Bonds issued under the new issuance will see a step-up in interest rate based on the achievement of three SPTs, including reducing absolute Scope 1 and 2 emissions by 100% by 2030 from a 2019 baseline, maintaining the Airport Carbon Accreditation Level 4+ when reviewed in 2030, and reducing per-passenger Scope 3 emissions (excluding from aircraft sources by 30% by 2030, compared to 2019.
The coupon step-up is 20 bp per annum if one SPT is not met, 30 bp for two SPTs, and 40 bp if all three are missed, for a maximum cumulated step-up of 120 bp over the three interest periods.
According to ADR, demand for the offering was strong, and generated significant international interest, particularly from specialized ‘ESG’ investment operators. The offering was nearly 5x oversubscribed, drawing €1.9 billion of orders, with 95% of those coming from foreign investors.
Marco Troncone, Aeroporti di Roma CEO, said:
“This new issue reaffirms the consistency between Aeroporti di Roma’s commitment to sustainable development and its sustainable financing strategy. The SLB reinforces the credibility and transparency of the sector’s environmental transition plans, and will also be a guideline in support of our medium-long term development plan, to best combine environmental and social sustainability requirements with strengthening the competitiveness of a strategic sector for the country.”
Sustainability-linked debt is one of the fastest growing areas of sustainable finance, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. Corporate interest in sustainability-linked loans has grown rapidly, as the financing provides flexibility to use proceeds for general corporate purposes, while with instruments such as green bonds, raised funds can only be allocated to specific categories of green projects.
Following an extended period of rapid growth, however, SLB issuance slowed sharply in late 2022, with Moody’s Investors Service citing factors such as growing market scrutiny on the credibility and robustness of issuers’ SLB targets, and the sector’s exposure to high-yield issuance.