Air France-KLM: Come Fly with SLBs

The Anthropocene Fixed Income Institute analysis on Air France-KLM's inaugural Sustainability-Linked Bonds (SLBs).

• The Key Performance Indicators (KPIs) included in the SLB are intensity measures and baselined to 2019, i.e. before the pandemic when volumes were high. Emissions dropped in 2020 in absolute terms, but increased on intensity measures. Setting the reduction from 2019 is therefore more ambitious, and the probability of pay-outs in the SLB structure commensurately higher. We estimate it at around 50%.

• Examining the public information on this deal, we find several positive elements of use of this product in the aviation sector. Using the AFII option pricing model, we estimate the value for the 5y bond SLB premium to be 7.5bp.

Source: https://anthropocenefii.org/afii-slb#2c3345fd-fbf5-46d2-917b-f71c7764b546