Heathrow was the well-deserved winner in the Bonds Below £750m category, with its debut sustainability-linked bond. This 10-year €650m deal was the first issuance by an airport to include validation from the Science Based Targets initiative (SBTi).
Launched in July 2023, the bond was the culmination of more than two years of work, resulting from two ambitious goals for 2030: a carbon reduction in the air of 15%, and a carbon reduction on the ground of 46.2%, both using a 2019 baseline.
The transaction was also the first issuance under Heathrow’s recently established Sustainability-Linked Bond Framework, which was developed in line with ICMA Principles. The Sustainability Performance Targets contained in the framework represent a major advance for the airport sector, as they were the first to comprehensively include Scope 3 emissions.
Following strong engagement from more than 100 investors, the deal was announced with Initial Price Thoughts of MS+165-170bps. With demand proving to be strong, updated pricing guidance of MS+150bps was released, after which the orderbook continued to grow and peaked at €2bn. Consequently, Heathrow was able to set a final size of €650m and price at the tighter end of guidance at MS+148bps.
The success of the trade was evidenced by the participation from SFDR Article 9 funds, which is rare for an issuer in a hard-to-abate sector. Barclays, BNP Paribas, Lloyds, NatWest Markets and RBC Capital Markets were joint active bookrunners, with Société Générale as the SLB structuring bank.
Heathrow’s Treasury Funding team led the project, which required collaboration with many teams across the business, including carbon, sustainability, legal, communications and finance. The team also maintained dialogue with the HR team to ensure that KPIs were aligned with colleague appraisal metrics.
Demonstrating alignment with SBTi was also key to the deal’s success, as a means of enhancing the proposition, achieving gold standard credentials, and mitigating the reputational risks associated with greenwashing.
This ground-breaking debut sustainability-linked bond required a lot of work internally, and was particularly noteworthy due to the inclusion of the Scope 3 element in a difficult sector.