Development lenders have extended the reach of sustainability-linked loans to Cape Verde in a transaction that marked their first SLL for an airport operator. Although the deal’s failure to reference the borrower’s Scope 3 emissions contrasts with Heathrow Airport’s recent landmark sustainability-linked bond, the unprecedented 20-year financing may now bring further SLLs to the African island state.
Three prominent institutions supplied the SLL package under a new sustainability-linked financing framework for Cape Verde Airports, a subsidiary of French conglomerate Vinci. These were World Bank affiliate International Finance Corporation; DEG – Deutsche Investitions- und Entwicklungsgesellschaft, part of German development bank KfW; and Proparco, a unit of Agence Francaise de Developpement.
The development lenders did not require the financing to be sustainability-linked. That was Vinci’s decision, though the IFC worked with it to develop the structure, according to an IFC spokesman.
Vinci and the lender trio did not consider structuring the deal as an SLB. Although the IFC would have been open to that in principle, “the relatively modest amount of the financing” ruled it out, according to the spokesman.
A DEG spokeswoman described the loan as supporting “a much-needed transport infrastructure project with macroeconomic benefits for the local economy”. She added that they would boost “the essential, capacity-constrained and not substitutable air transport infrastructure of Cabo Verde’s remote tourism sector”.
She also said that they would help “transition to eco-friendly local airports” and will contribute “significantly” to reducing the airports’ CO2 emissions.
Although the borrower announced the deal at €60m, it may grow larger. A DEG spokeswoman said it had committed up to €30m alongside its peers, while the IFC spokesman said that another loan “may be envisaged to fund future capital expenditure and it will likely be structured as an SLL”.
No Scope 3
While the SLLs require the borrower to lower greenhouse gas emissions and achieve a carbon-management certification while developing its seven airports, they do not reference Scope 3 emissions.
Vinci and the IFC discussed adding them as a target, according to the IFC spokesman, but opted instead to use progress on another measure – the Airport Carbon Accreditation scheme. CVA must achieve Level 3 ACA certification by 2028 and Level 3+ by 2030, with targets still to be determined for the loan’s remaining 13 years.
This could be ACA Level 4 certification, a measure that requires a Paris Agreement-aligned long-term carbon-management strategy aimed at absolute emissions reductions and driving third-party reductions.
The IFC plans to explore this option and Scope 3 before lending more to CVA. “Prior to any new SLL, IFC will discuss with the borrower whether the regional context can enable it to engage with third parties on emissions reduction and access options for a Scope 3 emissions KPI,” the spokesman said.
Airports have been controversial issuers of sustainability-linked financing, with Aeroporti di Roma’s 2021 and 2023 SLBs criticised for incorporating passenger emissions measures rather than those relating to aircraft – though it is also required to maintain a more stringent ACA accreditation than CVA of Level 4+ by 2030.
Bankers said Heathrow’s €650m deal in July sets a new benchmark for the sector. It incorporated “in the air” Scope 3 emissions for the first time, as well as the full emissions range for “on the ground” operations plus two-thirds of suppliers using science-based targets by 2027.
Wider potential
The IFC sees wider potential in sustainability-linked financing with loans and bonds in Cape Verde, which remains a low-income country eligible for concessional lending from the World Bank’s International Development Association – though it left the "least developed country" category in 2007. Besides the airports, other infrastructure assets “could lend themselves to SLFs”, the spokesman said.
The IFC “is in discussions with potential clients in this regard”, he said.