ESG is an acronym for environmental, social and governance, and denotes a framework that enables investors and financiers to assess the activities of different organizations from a sustainability perspective, not only from a financial point of view. Eligibility for ESG financial products highlights the company’s commitment to sustainability, as well as other socially relevant issues, in its day-to-day operations. ESG-linked instruments can provide benefits in the form of lower financial costs (or “greenium”) for organizations that achieve ambitious ESG goals.
The EUR 325 million interest rate swap agreement concluded by Budapest Airport Zrt. has a term of 2.5 years. The company’s counterparties are BNP Paribas Hungary, which acted as coordinator and subscribed for EUR 200 million, and Crédit Agricole CIB. Rothschild & Co acted as advisers, and assisted with preparation and implementation. The financial objective of the contracts is to swap interest rates, i.e. the variable interest rate on the company’s senior loans for a fixed rate, which will give the company predictability in its interest payments. For Budapest Airport, the financial benefit of the agreement was a less important consideration than the long-term reference to the environmental performance of airport operations. The cost of these sustainability commitments far outweighs the financial benefits of the derivative agreement. Budapest Airport looks forward to future green financing opportunities.
Chris Dinsdale, the CEO of Budapest Airport highlighted:
With the newly signed, ESG-linked swap agreement, we have taken another step towards our goal of net zero carbon emissions for the airport by 2035. Over the past ten years, Budapest Airport halved its direct carbon emissions and cut its emissions per passenger to a third of what it was. As part of this agreement, we have committed, amongst other things, to meeting our full electricity needs entirely from renewable sources, the airport operator will develop a solar power plant with a minimum capacity of 5 MW and will install at least 100 new electric charging stations at the airport.
Budapest Airport joined the “NetZero by 2050” initiative of Airports Council International (ACI) in 2019, which is a commitment for the company to achieve net zero carbon emissions from its operations by 2050 at the latest. However, the company recently announced that it is working hard to reduce its net emissions to zero by no later than 2035, up to 15 years earlier than the current 2050 target date.
At the end of November, the airport operator was awarded ACI’s “3+” carbon neutrality rating for the fourth time, and remains one of only 43 European airports that have achieved carbon neutrality and operate responsibly, in an environmentally conscious manner, fully offsetting the carbon emissions from its operations and thus meeting the strict requirements of the carbon neutrality level. In the new forms of financing, Budapest Airport has also pledged to achieve ACI’s maximum level 4+ carbon neutrality certification by the end of 2023, which currently only 9 airports hold worldwide.