Amsterdam’s Schiphol Airport has become the first in Europe to sell green-labelled debt, in a deal that underlines the tensions in the rapidly expanding environmental finance market. Vowing to become the “most sustainable airport in the world,” Royal Schiphol said it will use the money from the sale to finance energy-efficient buildings, electric vehicles for passenger transportation and other clean transport.
But given that the aviation industry is responsible for up to 2.5 per cent of global CO2 emissions, according to the UN Intergovernmental Panel on Climate Change, Royal Schiphol’s move is likely to sharpen the debate about the green bond market.
The airport’s operator, Royal Schiphol Group, sold a €500m green bond with a 12-year maturity and a coupon of 1.5 per cent on Monday. Investors put in more than €3bn of orders in a sale run by BNP Paribas, ING and NatWest Markets.
The market for green bonds has grown rapidly in recent years. A record $155bn of green-labelled debt was sold in 2017, according to credit rating agency Moody’s, which forecasts between $175bn and $200bn will be sold this year. Yet some green bond sales have drawn scepticism from campaigners and investors over the promised environmental improvements the borrowers deliver. For example, Poland, Europe’s biggest coal-producing nation, has sold two green bonds.
“Although the aviation sector will not transform to an environmentally friendly industry overnight, we as an airport have the ability, the means and the opportunities to invest in sustainable development,” Royal Schiphol said in its green bond framework, a document setting out how it plans to spend the bond proceeds. “We therefore act upon those elements that are within our scope of control.”
Mexico City became the first airport in the world to sell a green bond in 2016, with a $2bn deal. It then raised a further $4bn of green-labelled debt last year. Orlando Airport raised $1bn for the construction of environmentally friendly buildings last year but those bonds did not officially carry the green label.
Royal Schiphol’s green bond framework was reviewed by research firm Vigeo Eiris and credit rating agency S&P Global, while the green bond itself will be certified by the Climate Bonds Initiative, a non-profit that promotes investment in low-carbon initiatives. The company intends to commission an external audit of its use of the proceeds from the bond in a year’s time.
Vigeo Eiris said in its review that Royal Schiphol had no involvement in controversial activities including the fossil fuels industry, and only a small involvement in selling alcoholic beverages and tobacco.
Source Financial Times