Sustainable Finance for Airlines – Poised to Rebound?

Airlines have been making use of sustainable financing since 2018, when All Nippon Airways (ANA) of Japan launched a Yen 10 billion (US$90 million) green bond to finance a new energy-efficient training facility. Since then, there have been around 60 sustainable finance debt transactions arranged by 23 airlines with a value of c.US$28 billion. The most frequent issuers of sustainable finance have been European airlines, led by Air France-KLM and IAG. Other active issuers have been Etihad Airways, Japan Airlines and JetBlue. Airline sustainable finance transactions peaked in 2023 when over 20 transactions worth c. US$10 billion was spent by airlines. Since 2023, however, there has been a sharp decline in these transactions, especially so far in 2025.

A key test of the aviation sustainable finance outlook will be how several airlines refinance their current sustainable debt which come up for maturity in 2025 and in 2026. In addition, several aviation sustainability changes are coming into play that will increase airline opex and capex considerably, raising the need for financing and potentially reviving sustainable airline finance issuance. These include the ending of free ETS (Emissions Trading Scheme) allowances in Europe in 2025, the start of purchasing of CORSIA credits from late 2025, increasing Sustainable Aviation Fuel (SAF) mandates and costs and an expected increasing need to purchase carbon removal offsets.

This article explains the history, the size, the instruments and the main issuers of airline sustainable finance and how more airlines can prepare to tap this avenue of capital in future, including a useful Sustainable Finance Checklist.

The global sustainable finance market – c.7% of total debt funding and stable

Sustainable finance has been around since 2007 when the European Investment Bank issued the world’s first green bond, raising €600 million (US$820 million) for renewable and efficient energy projects. This was followed in 2008 by a SEK2.3 billion (US$310 million) offering from the World Bank to enable Swedish pension funds to invest in environmental projects around the world.

The global sustainable funding market in terms of issuance was US$1.66 trillion in 2024 and is set to be around US$1.7 trillion in 2025, according to ING Research, including issuance by financial institutions, corporates, governments and supranational organisations like the World Bank. Of the US$1.66 trillion in 2024, sustainable bond issuance was US$1.13 trillion and new sustainable loans totalled US$520 billion.

To put this in perspective, sustainable bond issuance of US$1.13 trillion represented around 7% of total bond issuance of US$16.7 trillion globally in 2024 (source: LSEG), having increased from US$640 billion in 2020 (4% of total bond issuance). On the London Stock Exchange in 2024, US$72 billion of sustainable bonds were issued, which represented 7.3% of total bond issuance of US$979 billion on the exchange. This was, however, a reduction from 11.4% of total issuance in 2023 (US$85 billion out of US$747 billion), reflecting a -15% decline in sustainable bond issuance but a +31% increase in total bond issuance on the exchange.

Sustainable finance is therefore a small but meaningful and relatively stable funding mechanism since 2021, having grown exponentially since 2007.

Figure 1: Global sustainable finance issuance, 2020-2025F (US$ billion)

Source: ING Research. Includes debt funding and excludes equity funding.

The history and size of the aviation sustainable finance market

Sustainable finance in aviation began in October 2018 when All Nippon Airways (ANA) issued a Yen10 billion (US$90 million) 10-year green bond to finance construction of an energy efficient crew training facility. ANA followed this in 2019 with a Yen5 billion (US$45 million) 7-year social bond to fund various initiatives to improve mobility access for disabled travellers and to boost diversity and inclusion. In the same year, Etihad Airways secured a €100 million (US$110 million) sustainable loan to fund construction of a sustainable apartment complex for its cabin crew. The Etihad Eco-Residence, as it was named, met the requirements of two of the United Nations’ 17 Sustainable Development Goals (SDGs) – Goal 7 (Affordable and Clean Energy) and Goal 9 (Industry, Innovation and Infrastructure) – that were officially launched in 2016.

The first ever sustainability-linked funding for general purposes by an airline was undertaken by JetBlue in February 2020 with a US$550 million 5-year revolving credit facility (RCF), whose interest rate and commitment fee were linked to JetBlue’s ESG (Environment, Social, Governance) rating score determined by specialist rating agency, Vigeo Eiris.

This was followed by the first aviation sustainability-linked bond in October 2020 by Etihad Airways with a US$600 million 5-year ‘Transition Sukuk’ (Islamic bond) that was underpinned by Etihad’s target to reduce its carbon intensity by -17.8% by the end of 2024 compared to its 2017 baseline of 574 grams of CO₂ per Revenue Tonne Kilometre (RTK).

The first sustainable aircraft funding for specific aircraft assets was by International Airline Group (IAG)’s subsidiary, British Airways, in July 2021 with a US$554 million 10-year Sustainability-Linked EETC (Enhanced Equipment Trust Certificate) that was secured on three Airbus A320neos, an A350-1000 and three Boeing B787-10s, which were delivered in that year. The annual coupon on the EETC notes (2.9% for the Class A tranche and 3.9% for the Class B tranche) would step up from 2026 by 25 basis points if BA’s carbon intensity reduction target of -8.1% (compared to 2019) for its Scope 1 emissions is not met by the end of 2025.

Since 2018, airlines have raised around US$28 billion of sustainable finance in 63 known transactions, as shown in Figure 2. Aircraft lessors have raised c.US$4 billion of sustainable financing over the same period.

Sustainable airline and lessor financing has been equivalent to c.5% of total aircraft delivery funding, the main use of proceeds for airlines, over the period since 2018, as tracked by Boeing Commercial Aircraft Finance Market Outlook (see Figure 3). Sustainable financing represented as much 12% of aircraft delivery financing in 2023 and 2024, the peak years for such financing in the sector. 

Airlines and lessors require funding for more than just aircraft deliveries and pre-delivery payments, such as for working capital and for servicing debt and equity. In addition, many airlines arrange RCFs that they hope never to drawdown but need standby funds in case of an unexpected shortfall in other cash sources, which was the case during the pandemic. So sustainable finance in 2023 and 2024 is likely to have accounted for slightly less than 12% of their total funding requirements and slightly less than 5% for the total period since 2018.

Figure 2: Global airline sustainable finance issuance, 2018-2025 YTD (US$ billion)

Source: Company announcements and various media articles, including DBRS Morningstar, Greenair and Ishka, and the author’s estimates. 2025 is year to date October.

Figure 3: Global airlines – total aircraft delivery funding, 2018-1H25 (US$ billion)

Source: Boeing Commercial Aircraft Finance Market Outlook 2025 H1 Update. Includes cash funding, generated internally and externally.

What defines sustainable finance in aviation?

Ignoring the difference between bonds and loans, there are basically three types of sustainability finance – Sustainable bonds and loans, Sustainability-Linked bonds and loans and Transition bonds and loans.

Sustainable bonds and loans (green and social).

Sometimes known as ‘use of proceeds’ financing, sustainable bonds and loans finance a specific project or projects that have a positive contribution to sustainability or at least a neutral impact should the borrower already be sustainable (e.g. Green Projects). An example is a green bond to finance low carbon or zero carbon projects, such as to fund a solar panel manufacturing plant or a wind farm or development of an electric powered aircraft.

Sustainable bonds and loans in principle cannot be used to fund general corporate requirements or to fund most aircraft purchases. This is because aviation is a high carbon sector that is difficult to decarbonise and does not meet the key principles of green bonds and green loans (Green Loan Principles by the Loan Market Association (LMA) and Green Bond Principles by the International Capital Market Association (ICMA)). Apart from funding a training facility (ANA) and a crew residence complex (Etihad), sustainable bonds and loans have consequently been rarely used by airlines and lessors. In general, airlines and lessors have to fund the purchase of aircraft in the normal course of business and therefore raising green bonds and loans to do so would attract accusations of ‘greenwashing’.

Singapore-based Avation, however, managed to secure a loan in 2019 from Deutsche Bank to purchase three ATR-72 turboprop aircraft for lease to Braathens Regional Airways of Sweden on the basis that these aircraft generated 40% fewer emissions than the jet aircraft they replaced. Vigeo Eiris, an ESG consulting service provider, issued a Second Opinion that the loan was compliant with Green Loan Principles.

Green bond and loan principles specifically allow ‘clean transportation’ projects, and therefore, they could be used by airlines and lessors to fund the development and purchase of electric and hybrid-electric aircraft. They could also be used to fund the purchase of carbon offset projects, such as carbon capture and sequestration (CCS), which airlines will increasingly have to purchase under CORSIA (see later in this article) to achieve net zero emissions by 2050. 

Sustainability-Linked bonds (SLBs), loans (SLLs) and leases.

These can be used for general corporate purposes and are not necessarily tied to specific projects or purchases. But the financial terms and/or interest rate are linked to sustainability performance targets (SPTs) of the borrower. These are popular in hard to abate industries, such as aviation, where net zero or low carbon is a long way off but the borrower has a credible plan to lower its emissions. They are also popular because they are more flexible as to the use of proceeds.

Typically, these financings have just one SPT and sometimes there have been two SPTs but rarely more than two, given the complexity that three or more measures would entail.

In the aviation sector, the most common SPT is gross carbon intensity as measured by grams of CO₂ per revenue passenger kilometre (RPK) or per revenue tonne kilometre (RTK) for airlines with significant cargo operations. Air France-KLM, for example, issued two Sustainability-Linked bonds in 2023, €500 million each with a total value of €1.0 billion (US$1.1 billion). The first bond had a 7.25% annual coupon with a three-year maturity (May 2026) and the second had an 8.125% coupon with a five-year maturity (May 2028). Air France-KLM’s SPT is to reduce Scope 1 plus Scope 3 CO₂ intensity by -10% by 2025 compared to a 2019 baseline of 957 gCO₂ per RTK. If this SPT is not achieved, the airline group will pay additional interest of 0.75% on the maturity of the first bond and a step up in the coupon of the second bond by 0.375% in the last two years for a total of 0.75%. Air France-KLM’s -10% reduction in carbon intensity by 2025 is part of an overall target of -30% by 2030 compared to 2019.

The SPT can be used to step-up the interest rate in case of under- or non-performance, as in the case of the Air France-KLM SLBs, and/or to step-down the interest rate in the case of out- or inline-performance to the SPT. Mexican low cost carrier, Volaris, for example, issued a sustainability-linked bond in 2021, whereby the coupon would step-up by 25 basis points if its carbon intensity target was not met and step-down by 25 basis points should the SPT be met or exceeded.

The sustainability link can also be to other SPTs, such as ‘the percentage fuel uplift in the form of sustainable aviation fuel (SAF)’ or ‘the proportion of aircraft fleet comprised of new generation aircraft’ or an ESG score from a rating agency, such as the Carbon Disclosure Project (CDP) or the Transition Pathway Initiative (TPI).

In general, the SPT must be material to the borrower’s core sustainability and business strategy and should be science-based and linked to the Paris Agreement of 2015 to limit global warming to below 2 degrees centigrade above pre-industrial levels and to pursue efforts to limit it below 1.5 degrees. This requires verification by an independent third-party, or ‘Second Opinion’, that the SPT is material and science-based and that the financing conforms to the Sustainability-Linked Loan Principles (SLLPs) of the LMA or the Sustainability-Linked Bond Principles (SLBs) of the ICMA, whichever is appropriate to the specific financing.

The aviation sector has taken the concept of SLBs and SLLs one step further by applying their principles to finance leasing and even operating leasing. The most common sustainability-linked finance leasing is based on the Japanese Operating Lease with Call Option (JOLCO) structure, which is funded by a mix of Japanese investors for the equity portion and a financial institution for the debt portion to provide an airline with 100% financing for the aircraft asset. Sustainable investing has proved to be popular in Japan.

Transition bonds and loans.

These sit somewhere in between sustainable financing and sustainability-linked financing. They are typically used in high-emitting industries to raise long-term capital to fund a company’s transition to a low but not necessarily a zero- carbon environment. Transition bonds and loans are typically used to fund specific decarbonisation-focused projects with an emissions outcome specific to the project. These financings do not necessarily have an interest rate linked to the project’s objective.

The main examples of transition financings in the aviation sector are the Transition Bonds and Transition-Linked Loans issued by Japan Airlines (JAL) between 2022 and 2024. In total, it issued four Transition Bonds for a total of Yen110 billion (US$735 million) with five- to 15-year maturities and two Transition-Linked Loans for a total of Yen38 billion (US$275 million). They were used to fund the purchase of new A350s and B787s.

The Transition Bonds were underpinned by JAL’s objective to reduce the carbon intensity of these new aircraft by 16-18% compared to the aircraft that they replaced, which were primarily B777-200s. The bonds conformed to the principles of the Japanese Government’s ‘Japan Climate Transition Bond Framework’. Investors for the bonds were mainly domestic funds, life insurers and banks.

The Transition Linked-Loans are essentially the same as Sustainability-Linked Loans because they have two SPTs to (i) maintain reported gross carbon emissions at the same level or lower in FY2025 (year ending March 2026) as it achieved in FY2019 (year ending March 2020) and (ii) reduce gross emissions by -10% by FY2030 compared to FY2019. If the SPTs are achieved, the interest rate on the loans will be stepped down from FY2026 and FY2031.

Figure 4: Global airlines – sustainable financings by type, 2018-2025 YTD (US$ billion)

Source: Company announcements and various media articles, including DBRS Morningstar, Greenair and Ishka, and the author’s estimates. 2025 is year to date October.

By far the most common sustainable financing option used by airlines has been the Sustainability-Linked Loan structure, as shown in Figure 4, accounting for 80% of global aviation sustainable funding since 2018, raising US$22.7 billion in a total of 36 transactions. A significant portion by value of these SLLs have been in the form of RCFs and other facilities, which is how most loans start. For example, Jet2 arranged a sustainability-linked RCF for £300 million (US$360 million) in 2022, easyJet signed a US$1.75 billion SL RCF in 2023, Air France-KLM arranged two SL RCFs totalling €2.38 billion (US$2.6 billion) in 2023, TUI signed a €2.7 billion (US$2.9 billion) SL RCF in 2023, IAG arranged a US$3.0 billion SL RCF in 2024 and Lufthansa arranged a €2.5 billion (US$2.7 billion) SL RCF in 2024. JetBlue arranged a US$550 million SL RCF in 2020 and renewed it in 2024.

Most of these facilities are undrawn and exist for standby purposes, suggesting that airlines continue to rely on more conventional funding, such as plain operating and finance leases and operating cash flow, for most of their financing needs.

The other popular sustainable funding options for airlines are SLBs (US$3.2 billion, nine transactions) and sustainability-linked finance leases or, more specifically, SL JOLCOs (US$1.1 billion estimated, 17 transactions). The JOLCOs have a relatively high number of transactions compared to their value because each transaction is a single aircraft. This is also the case with SL operating leases (Three for Singapore Airlines are the only such transactions since 2018).

European airlines the leaders of sustainable finance

As shown in Figure 5 below, seven out of the top 10 issuers of aviation sustainability finance are European airlines (Air France-KLM, easyJet, IAG, Jet2, Lufthansa, Pegasus Airways and TUI). The stand-out leaders among them are IAG and Air France-KLM, issuing US$8.1 billion and US$4.8 billion, respectively. This is consistent with their leading roles in the global airline industry on sustainability issues, especially climate transition. Other large players have been Etihad Airways (three transactions worth US$1.9 billion), Japan Airlines (US$1.0 billion transition bond and linked loans as already discussed) and JetBlue (US$1.1 billion).

International Airlines Group (IAG)

IAG’s US$8.1 billion sustainable financing represented 27% of its total external financing raised or arranged of US$30.2 billion between 2020 and 2024, which also included equity raising, debt raising, sale-and-leasebacks and an advance payment for Avios points from American Express for IAG Loyalty. IAG’s sustainable financing transactions have been wide-ranging:

• UK Export Finance (UKEF) guaranteed £2.0 billion (US$2.7 billion) five-year loan in 2020 and a £1.0 billion (US$1.35 billion) UKEF guaranteed facility in 2021 for British Airways, both with links to BA’s ESG targets and which were repaid early in 2023.
• Sustainability-Linked EETC (Enhanced Equipment Trust Certificates), the world’s first, essentially a 10-year asset-backed bond, of US$554 million in 2021 for British Airways to fund seven aircraft deliveries and linked to BA’s carbon intensity target for 2025. The overall transaction size was US$785 million, of which US$231 million was the equity portion, which was not sustainability-linked. The certificates were sold mainly to US and Japanese investors.
• Sustainability-Linked EETC of US$461 million issued by Iberia in 2022, in the form of a private placement, to fund five aircraft deliveries and linked to Iberia’s 2025 carbon intensity target.

Sustainability-Linked five-year RCF of US$3.0 billion, with two one-year extension options, arranged in June 2024, accessible by BA, Iberia and Aer Lingus and secured on aircraft and London Heathrow and Gatwick airport slots if drawn down. It is linked to IAG’s carbon intensity target for 2030 of 70 grams of CO₂ per RPK.

Air France-KLM

Air France-KLM’s sustainable financing of c.US$4.8 billion represented 14% of its total funding raised or arranged of US$34.7 billion between 2020 and 2024, although it represented 32% of all its funding between 2022 and 2024 when it used sustainable instruments. Like IAG, Air France-KLM has used several types of sustainable financing:

• Sustainability-Linked Secured Term Loan for an A350-900 in 2022 for Air France with sustainability performance targets based on the ‘proportion of new generation and fuel- efficient aircraft’ in Air France’s fleet and its uplift of SAF.
• Sustainability-Linked three-year RCF for Air France-KLM and Air France as combined borrowers, with two one-year extensions, of €1.2 billion (US$1.3 billion) in 2023. This was increased to €1.38 billion (US$1.5 billion) in 2024.
• Sustainability-Linked four-year RCF for KLM, with two one-year extensions, of €1.0 billion (US$1.1 billion) in 2023.
• Sustainability-Linked Bonds of €1.0 billion (US$1.1 billion) in 2023 split into two bonds of €500 million each with one bond maturing in 2026 and the other in 2028, as already described in this article.
• Sustainability-Linked JOLCOs for a total of eight A350-900s (two in 2022, three in 2023 and three in 2024).

In theory, Air France-KLM’s contribution to sustainable financing could be larger than US$4.8 billion raised between 2022 and 2024. When Air France was rescued by the French State during COVID in May 2020 with €7 billion (US$7.7 billion) state and state-guaranteed loans, this aid package contained several sustainability features. The airline had to agree to discontinue domestic flights that compete with trains that take less than two and a half hours. It also had to agree to renew its fleet (to protect Airbus, based in Toulouse) and to use 2% of fuel as SAF by 2025 (which became an EU-wide mandate). But this was rescuing financing in the form of State Aid rather than sustainability-linked financing, so it has not been included in transaction value figures in this article.

Twelve of the largest airlines in the world have been absent from sustainable finance 

Many of the largest airlines in the world have been absent from the sustainable finance market, including the four largest US airlines (American, Delta, Southwest and United) , the three largest state-owned airlines in China (Air China, China Eastern and China Southern), the two largest low cost carriers (IndiGo and Ryanair) and the three largest Middle East carriers (Emirates, Qatar Airways and Saudia).

Figure 5: Airline sustainable finance issuance by airline group, 2018-2025 (US$ billion)

Source: Company announcements and various media articles, including DBRS Morningstar, Greenair and Ishka, and the author’s estimates. 2025 is year to date October.

Why have airline sustainable finance transaction declined in 2025?

Sustainable finance in aviation peaked in 2023 and remained high in 2024 but has dropped off significantly in 2025 (see Figure 2). Yet overall global sustainable finance issuance in other sectors has remained relatively stable since 2021 and could even increase slightly in 2025 compared to 2024, as shown in Figure 1.

What are the reasons for this decline in aviation and could this trend last? Several reasons could explain the decline in 2025:

1. The major airline users of sustainable finance completed multi-year facilities and financings in 2020 to 2024 that do not need refinancing until 2029 to 2031.
2. A significant global decline since 2021 of the overall issuance of sustainability-linked bonds and loans (SLBs and SLLs), which are by far the sustainable finance instruments that airlines have used the most.
3. The recent requirement for EU airlines, the most prolific airline issuers of sustainable financing, to report their alignment with the EU Taxonomy since 2024 has caused significant implementation problems for these airlines, who cannot meet the overly stringent criteria to attract sustainable investment under the Taxonomy.
4. Several airlines have struggled to meet their near-term carbon intensity targets because of factors outside of their control (new generation aircraft delivery delays, new generation aircraft groundings due to lack of spare parts and available engines and circuitous routings due to airspace closures), resulting in an unplanned increase in the interest cost of sustainability-linked financings.
5. Overall sustainability fatigue among investors and banks, as evidenced by the collapse of the global Net Zero Banking Alliance (NZBA) and the suspension earlier in 2025 of the Net Zero Asset Managers (NZAM) initiative, after the withdrawal of US investors and lenders, and growing concerns inside and outside the aviation sector that its net zero target by 2050 is too far away and may not be achievable.
6. Finally, airlines and lessors may not be publicly reporting their sustainable and sustainable initiatives and finance transactions, especially if they are private, as much as they used to for fear of being accused of greenwashing, especially where they are not legally obliged to report such activities.

More detailed descriptions of these six drivers are provided below.

Sustainable aviation finance is small and multi-year RCFs are lumpy.

Aviation sustainable financing is still relatively immature and lumpy in its development. Not every year will see progression, unlike the overall sustainable financing market and in larger industrial, financial and government sectors. So, there will inevitably be years of significant declines and years of significant increases in issuance within the aviation sector. For example, US$13.6 billion of issuance by airlines in 2023 and 2024 were by airlines raising multi-year RCFs. This accounted for almost 80% of total airline sustainable finance issuance in 2023 and 2024 combined and were undertaken by Air France-KLM, easyJet, IAG, JetBlue, LATAM, Lufthansa and TUI. After exercising extension options, most of these facilities will be in place until 2029 to 2031, so it is not surprising that these airlines have not issued new RCFs in 2025 and are unlikely to do so for several years. But there has been some recent activity. TUI had a three-year Sustainability-Linked RCF in place until 2026 but this was extended in March 2025 to 2030 and increased by €300 million (US$325 million). Jet2 increased its £300 million Sustainability-Linked RCF in July 2025 to £500 million and extended its expiry from 2028 to 2030.

Global decline in sustainability-linked issuance despite sustainable financing still being popular.

Even though the overall sustainable finance issuance has remained relatively stable since 2021, issuance of sustainability-linked bonds has declined. Global SLB issuance sank by almost two-thirds from US$91 billion in 2021 to US$32 billion in 2024 and, in the first half of 2025, SLB issuance has fallen further by -21% from US$19 billion to US$15 billion, according to figures provided by LSEG. Sustainability-linked bond issuance is relatively small at 4% of total sustainable bond issuance in 2024 but it has fallen from 19% in 2021. In terms of overall sustainability-linked loans, ING Research’s figures suggest that issuance has almost halved in the first half of 2025 compared to the same period of 2021.

The vast majority of aviation sustainable finance is sustainability-linked, as already discussed, so aviation may have been affected by the overall negative trend in sustainability-linked finance. A lot of the overall decline in sustainability-linked finance by corporates has been in the US, even before the change in climate policy under the new Trump Administration. But this does not explain the decline in global aviation issuance because only two relatively small US airlines, Allegiant and JetBlue, have issued sustainable finance.

Sustainable and green bonds and loans have more direct and more meaningful linkages to clean energy achievement to attract investors and lenders, whereas sustainability-linked bonds and loans are perceived as offering unambitious climate targets, minimal financial incentives, greater greenwashing risks and potential measurement and verification issues.

Problematic EU Taxonomy not helping.

EU Taxonomy regulation could have been a factor for the decline in sustainability-linked finance, both overall in Europe and in the aviation sector. The EU Taxonomy is a classification system for environmentally sustainable activities, which many institutional investors use when deciding which sectors and companies to invest in. The European Commission has designed the regulation to channel finance towards industries which are transitioning to a low carbon environment and to prevent ‘greenwashing’. The Taxonomy has attracted complaints from investors, banks and corporates across most sectors, including and particularly aviation.

The aviation sector, being a high emitting sector, was initially excluded from the Taxonomy when it came into force in 2020, therefore deterring investors and banks who use the Taxonomy from the sector. From 2024, however, airlines based in the EU have had to report on the proportion of their revenue, capital spending and operating expenses that are aligned to the Taxonomy. EU lessors are due to start reporting from 2026 based on 2025 data, although this may be delayed due to problems caused by the Taxonomy in the sector (read on). Aligned activities and capex in aviation essentially only include those of new generation aircraft (A220, A320neo family, A330neo, A350, ATR 42/72, B737MAX, B787, B777-X and E190-E2). In addition, any ‘growth’ new aircraft that do not replace an aircraft permanently withdrawn from use are excluded. This is because the EC believes that the total size of the global airline fleet should not grow. It thinks that the sector should be penalised because, over the last ten years, on average only 0.48 aircraft have been permanently withdrawn from use for every new aircraft delivery. The opex alignment criteria are even more bizarre and only includes maintenance opex. As a general rule, companies must be at least 85% aligned to attract investors seeking alignment to the Taxonomy.

The reporting by EU airlines in 2024 on their alignment has been problematic. In their annual reports, Air France-KLM and IAG complained about how inappropriate the Taxonomy was to their sustainability initiatives. For example, the purchasing of SAF, offsets and ETS allowances are excluded from being sustainable activities. In terms of their alignment to the Taxonomy, Air France-KLM reported 23% alignment of its activities in terms of revenue and 49% of its capex. For IAG, it was 35% and 65%, respectively, and, for Lufthansa, it was 9% and 62%, respectively. So, nowhere near the 85% needed to attract Taxonomy investors. Norwegian and Ryanair declared they were 0% aligned, presumably because all new generation aircraft deliveries in 2024 went on growth rather than replacement. Wizz Air did not report, saying it needed more clarity on the regulation. The second largest pan-EU airline, easyJet, did not report because it is based in the UK and is not required to adopt the EU Taxonomy.

Risks in achieving environmental targets due to external events outside an airline’s control.

Airlines are concerned about not achieving their carbon intensity targets due to new aircraft delivery delays, grounded aircraft due to lack of spare parts and engine problems, especially Pratt & Whitney, and circuitous air routings between Europe and Asia due to the closures of Ukrainian, Russian (except for airlines in China, India and UAE) and, occasionally, Midde East airspace. These impacts are outside of the control of airlines. Supply chain delays and engine issues are causing airlines to use older aircraft for longer, which a recent Oliver Wyman report for IATA had a cost impact of US$4.2 billion in 2025 in terms of delayed fuel cost efficiency. It quantified the extra CO₂ emissions to be 17m tonnes in 2025, 1.8% of total aviation emissions of 950 million tonnes.

Air France-KLM, for example, is unlikely to achieve its target of a -10% reduction in its gross carbon intensity from 957 grams of CO₂ per RTK in 2019 to 861 grams in 2025. The group only reached 928 grams in 2024 (-3%) and 924 grams (-3.4%) in the first half of 2025. If it does not meet its 2025 target, it will have to pay additional interest of €7.5 million (0.75%) on its €1.0 billion of SLBs.

In another example, Volaris has already experienced an increase in its financial costs since 2022 as a result of missing its carbon intensity targets. These were due to A320neo delivery delays and Pratt & Whitney engine issues causing it to keep its old A320 fleet for longer. Since it arranged an SLB and Sustainability-Linked PDP Facility in 2021 and 2022, further financing since then has not been sustainability-linked.

Not all airlines are missing their environmental targets. IAG, for example, achieved its 2025 carbon intensity target of 80 grams of CO₂ per RPK (-11% versus 89.8 in 2019) one year early in 2024 (78.1 grams, -13% versus 2019).

Sustainability fatigue.

The recent collapse of the Net Zero Banking Alliance (NZBA) and the suspension earlier this year of the Net Zero Asset Managers (NZAM) initiative, following the withdrawal of major US banks and asset managers are clearly negative for sustainability-based lending and investment. Even though these US asset managers and banks have frequently stated publicly that climate change is one of the most critical challenges that needs to be addressed globally today, they fear retribution from the Republican party and consequent legal and reputational risk and loss of business from Republican states. The rest of the world still believes in the climate cause. Many US asset managers have already lost mandates from European pension schemes.

The loss of US banks and investors, however, are unlikely to have directly impacted sustainable aviation funding. US banks and asset managers were never large players and only two small US non-major airlines have ever sought such funding. But the chances of other US airlines participating would appear slim until at least there is a change in the US Administration.

More worrying is scepticism within the aviation sector about its ability to achieve Net Zero by 2050, given the long lead times to develop new aircraft and engine technologies and the high cost and slow development of SAF. But IATA has stood by its 2050 target, as recently as its AGM in June 2025.

Private transactions not being reported.

The lack of reported transactions so far in 2025 may be partly due to airlines, lessors and financiers not reporting them as much as they used to. Except for publicly listed bonds and other capital market transactions, there is no disclosure obligation to announce funding arrangements and their sustainability links. RCFs, loans, finance and operating leases do not have to be announced, especially if they are private transactions. In addition, airlines, lessors and banks may be fearful of greenwashing accusations and are therefore not highlighting their sustainability activities as much as they used to.

The outlook for sustainable finance in aviation

Major tests of the aviation sustainable finance market will be how the current leaders in the sector choose to refinance their existing sustainable loans, bonds and facilities, some of which are coming up soon. If existing issuers of sustainable finance do not renew or refinance with sustainable finance instruments with updated SPTs, this would be a negative signal to the rest of the industry.

Around US$1.9 billion of sustainable airline financing matures between November 2025 and the end of 2026:

• Etihad’s five-year US$600 million Sustainability-Linked Sukuk matured on 3 November 2025 but there has been no news of its refinancing.
• Allegiant’s US$100 million Sustainability-Linked RCF expires in March 2026.
• Air France-KLM’s first €500 million (US$580 million) Sustainability-Linked Bond matures in May 2026.
• ANA’s Yen5 billion (US$33 million) seven-year Social Bond matures in May 2026 and its Yen20 billion (US$300 million) five-year Sustainability-Linked bond matures in June 2026.
• Volaris’ MXN1.5 billion (US$80 million) Sustainability-Linked Bond matures in October 2026.

It is encouraging that Jet2 and TUI renewed and extended their RCFs in 2025 and kept their sustainability links. But it is unclear if easyJet retained its sustainability links on its RCF that was replaced in June. Going back, Korean Air did not replace its Green Bonds that matured in 2022, 2023 and 2024 with sustainable bond offerings.

A potential newcomer to sustainable aviation finance could be Riyadh Air, the brand-new Saudi airline that had a soft launch on 26 October and currently only operates one aircraft. Owned by the sovereign wealth fund, Public Investment Fund (PIF), Riyadh Air has up to 182 aircraft on order (124 firm orders and 58 options) for delivery over the next 10 years that will need funding. Riyadh Air’s CEO, Tony Douglas, told the media earlier in October that the airline will finance itself with a mix of Sukuks, sustainable debt and sale and leasebacks. The airline’s CFO, Adam Boukadida, is very familiar with sustainable aviation finance, having previously been CFO of Etihad when it undertook three such financings between 2019 and 2022, raising US$1.9 billion, including the airline industry’s first sustainability-linked bond.

If Riyadh Air undertakes sustainability-linked finance, it will be interesting to see if and how it sets a carbon intensity target. Most airlines are steadily transitioning from legacy, high emitting aircraft to a new generation lower emitting fleet, demonstrating a steady reduction in carbon intensity. Riyadh Air, on the other hand, starts with new generation aircraft (B787-9s, A321neos and A350-1000s). Its carbon intensity and fuel consumption will therefore start at industry best practice levels and will be driven mainly by changes in the relative mix of narrowbodies and widebodies. Apart from other efficiency initiatives, the underlying carbon intensity by aircraft type is unlikely to change.

ETS, CORSIA, increasing SAF costs and carbon removals are potential catalysts for reviving sustainable airline finance

The costs to airlines of the climate transition will start to escalate from 2026, requiring more financing needs. Even though additional costs of compliance will eventually have to be paid for by passengers and cargo customers when they fly, airlines will have to make advance contributions in the form of purchasing agreements and emission allowances, carbon offsetting and removal credits and investments, which will require funding. The increasing funding needs could possibly help catalyse a revival in sustainable financing and investments for aviation.

The main increasing financial burdens on airlines are fourfold:

• Ending of EU ETS (Emissions Trading Scheme) free allowances from 2026 (only applies to airlines operating within the European Economic Area).
• Start of CORSIA offset credit purchasing from the end of 2025.
• Ongoing ramp up of sustainable aviation fuel (SAF) mandates to 5-10% of total jet fuel requirements by 2030 from 0.7% in 2025.
• Growing need to pay for carbon removal projects, which will eventually replace the ETS and CORSIA market-based schemes from the 2030s as the airline sector heads towards net zero by 2050.

There is also obviously the need to fund capital spending in new aircraft technologies as airlines replace their fleets with new generation aircraft and engines.

EU ETS (Emissions Trading Scheme) Allowances

Airlines used to receive 82% of their ETS allowances for free up to 2023. These were reduced by 25% in 2024 and by another 25% in 2025 and will be zero from 2026. Excluding changes in capacity, the price of carbon and hedging, the cost of EU allowances in 2026 could be more than five times the cost in 2023. Airlines have to surrender their ETS allowances by September of the following year and typically start purchasing them in the prior year. Therefore, for most European airlines, the cost of purchasing allowances in advance for 2026 will be significantly higher in 2025 than in 2024, while annual ETS costs will continue to climb rapidly in 2026. The only offset from 2026 will be allowances for use of sustainable aviation fuel (SAF) on intra-European routes.

IAG, for example, has seen an almost threefold increase in its ETS cost per intra-Europe ASK from 0.14 € cents in 2022 to 0.33 € cents so far in 2025, increasing its annual emissions cost from €134 million in 2022 to an estimated (by the author) €360 million in 2025, based on its run-rate over the first nine months of 2025 (see Figure 6).  That would imply a step-up in annual cost of c.€120 million in 2025 compared to 2024. The step-up in total ETS cost in 2026 is likely to be much higher than this as the free allowance reduction accelerates next year with the complete removal of free allowances.

Figure 6. International Airlines Group (IAG) – ETS cost analysis, 2021 to 9M25

Year	ETS Cost (€m)	ETS Capex (€m)	Free Allowances (€m)	Europe ASKs (m)	Cost per ASK (€c)	% change
2021	n/a	33	277	48,020	n/a	n/a
2022	134	360	273	96,575	0.14	n/a
2023	212	264	235	95,124	0.22	60.6%
2024	304	242	153	101,317	0.30	34.6%
9M25	297	n/a	n/a	91,051	0.33	15.1%

Source: International Airlines Group (IAG) annual and quarterly financial reports. IAG accounts for its ETS allowance purchases as capital spending and makes a provision for ETS costs in each financial period.

CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation)

The United Nations’ global offsetting scheme for airlines called CORSIA is administered by the UN agency, the International Civil Aviation Organisation (ICAO). CORSIA requires airlines to offset their emissions on international flights above 85% of 2019 levels by purchasing approved carbon credits in the form of CORSIA Eligible Emission Units (CEEUs). The first phase of CORSIA was originally due to start in 2021 but the impact of COVID on air travel meant that emissions went below 2019 levels until 2024.

The first three-year period of CORSIA began in 2024 and ends in 2026 with 129 countries participating on a voluntary basis. Exclusions are domestic routes, intra-Europe routes (which are covered by the EU, UK and Swiss ETSs) and routes to/from countries not participating in phase one (Brazil, China, India, Russia and Vietnam). Also, certain small islands and land-locked countries and some ‘developing’ countries are also not participating in the first phase.

ICAO will determine emissions for 2024, 2025 and 2026 on a sectoral approach, whereby it will calculate an annual ‘sector’s growth factor’ (SGF). At the end of October 2025, ICAO published the SGF for 2024 (15.95%), which represents the total increase in emissions on the combined relevant routes compared to 2019. Airlines can then calculate the number of CEEUs they have to purchase based on the SGF and their own emissions on the total relevant routes in 2019. Even though airlines do not need to pay for and surrender their CEEUs for the first phase until 31 January 2028, they will have to start to provide for them in their financial accounts now that the SGF for 2024 has been published.

In total, airlines will need to buy CEEUs with respect to 2024 covering 58 million tonnes of excess CO₂ emissions over the baseline. At IATA’s estimated cost per CEEU of US$23, total CORSIA cost for 2024 could be US$1.33 billion. For a large European airline group, like Air France-KLM or IAG, their total cost for 2024 could be of the order of US$50 to 60 million each. For European low-cost carriers, like easyJet and Ryanair, their total CORSIA costs will be almost nothing due to very little non-European flying. Even most of North Africa, which easyJet and Ryanair serve at scale, is currently exempt from CORSIA.

IATA expects total CORSIA costs to rise by more than 30% p.a. by 2026 to c.US$2.0 billion if the CEEU price remains at US$23 per tonne. When phase two begins in 2027, CORSIA will be expanded to 193 countries and will be mandatory, increasing the burden on airlines still further.

The financial cost of CORSIA to airlines is also likely to increase because of increasing demand and the lack of supply of approved offsetting projects, resulting in a significant increase in the CEEU price. There was only one approved offset project as of the end of 2024, a forestation project in Guyana. MSCI Carbon Markets, for example, forecast a price range of US$18-51 per tonne in 2024 to 2026, rising to a range of US$27-91 in the 2027 to 2035 period.

In total, IATA estimates CORSIA could generate up to US$17 billion of climate finance by 2035 paid for by the global airline sector. This is going to require substantial funding for airlines over the period, especially if they purchase CEEU credits in advance in order to hedge against future price rises.

SAF (Sustainable Aviation Fuel)

Along with new aircraft and engine technologies, sustainable aviation fuel (SAF) is expected to be one of the main enablers of aviation emissions reduction and net zero by 2050. SAF accounted for 0.3% of total jet fuel production and usage in 2024, according to IATA, at around 1.0 million tonnes (1.3 billion litres) and double that of 2023. IATA expects this to double again in 2025 to 0.7% and could increase by another 50% or more in 2026.  IAG was the biggest user of SAF in 2024, representing over 16% of total global demand and accounting for 1.9% of its own jet fuel requirement.

By 2030, the global proportion of SAF could be of the order of 5% of total jet fuel needs, which could equate to c.18 million tonnes (23.5 billion litres). But this will depend critically on there being sufficient SAF production capacity by then and on the willingness of airlines in the United States and China to adopt SAF in their domestic markets. They will be forced to by mandates in many international markets. Mandates and government targets around the world vary between 3% and 10% by 2030, such as the EU’s 6%, UK’s 10% and India’s 5%. Leading airlines, such as Air France-KLM and IAG, target 10% SAF usage by 2030 and 70% by 2050.

One of the critical issues with SAF is its prohibitive cost with estimates of two to five times the current cost of jet fuel of around US$600 per tonne. Assuming that SAF is on average 3.5 times more expensive than conventional jet fuel (say US$2,100 per tonne versus US$600), going from 0.7% SAF usage in 2025 to 5% in 2030 would imply average fuel cost increasing from US$610.50 to US$675 per tonne, an increase of c.11%. Going to 10% SAF usage by 2030 would imply an average fuel cost of US$750 per tonne, an increase of c.23% compared to the current price of conventional jet fuel.

In addition to funding an increase in unit fuel cost, which will have to be mainly met by higher ticket prices and air cargo rates, airlines may also have to fund advance offtake agreements and investments in SAF projects and SAF funds, which airlines like IAG have been doing for almost 10 years. As incentives to develop SAF, both the EU ETS and CORSIA allow airlines on the relevant routes to reduce their offsetting requirements through the use of eligible SAF and low carbon aviation fuel (LCAF).

Carbon Removals

ETS and CORSIA are only transitional mechanisms for airlines to meet their carbon targets. The permanent solution alternative is carbon removal, which the industry expects to replace ETS and CORSIA by 2050. IAG, for example, targets carbon removals to account for 5% of its Scope 1 carbon emissions reduction by 2030 and for 19% to net zero by 2050, compared to 41% contribution from new aircraft and operational efficiency and 40% contribution from SAF.

Carbon removal solutions extract CO₂ already in the atmosphere and store it in biological or geological ways:

• Nature-based solutions (NBS) – carbon avoidance, such as creating new forests and peatland that capture and store CO₂ through photosynthesis, and enhanced rock weathering.
• Bioenergy carbon capture and storage (BECCS) – capturing carbon from industrial processes and storing it underground.
• Carbon capture and storage (CCS) with SAF production – including the use of by-products that can absorb CO₂.
• Direct air capture (DAC) and storage – absorbing CO₂ from the air using a catalyst.

Nature-based solutions are likely to be more prevalent in the short-term because they do not depend on technology development. There are around 50 BECCS plants that are operational globally today with another 50 under development and more than 500 planned. There are currently around 40 DAC plants and another 130 under development. CCS with SAF production is likely to be the most common removal choice for airlines over the long-term but there are currently no such plants currently in operation.

An opportunity for green loans and bonds in aviation?

The problem with CORSIA, ETS and carbon removals from a sustainable financing perspective is that some investors and rating agencies do not recognise offsetting activities outside of an airline’s own value chain. The Science Based Targets initiative (SBTi), for example, does not recognise the use of offsets by airlines – so-called ‘beyond value chain mitigation’ (BVCM) – or carbon removals to lower their carbon intensity targets. The concept of in-value chain reductions is a core premise of science-based reduction targets.

To align with the goals of the Paris Agreement, SBTi says that the aviation sector must reduce average gross carbon intensity by c.35 to 40% by 2035 and by c.65% by 2050 compared to 2019. That is why airline’s carbon intensity targets tied to their financings are gross and not net.

But, since 2021, SBTi has been developing a ‘Corporate Net-Zero Standard’, which considers carbon credits and removals when assessing net zero targets and pathways. Its second draft of this new standard was published in March 2025. At the moment, the draft standard recognises carbon removals as counting towards the achievement of science-based targets but BVCM, such as purchasing CORSIA credits and ETS allowances, will continue to not count. This may be frustrating for airlines because carbon removals are not expected to fully take over from ETS and CORSIA until well into the 2040s and there is an immediate and rising need to fund purchases of ETS allowances and CORSIA credits.

A net carbon intensity target rather than a gross target would be neat for airlines because it would incorporate all of their net zero levers into just one intensity measure.

If an airline raises funding specifically to purchase CORSIA credits and carbon removal project credits, this could qualify as a Green Loan under the category of ‘green technologies’ as laid out in the LMA’s ‘Green Loan Principles’ (GLPs). ETS allowances would probably not meet the criteria of the GLPs because they are not linked to specific carbon reduction projects.

SAF purchases would also not qualify because, even though SAF reduces life cycle emissions by 80% or more, it does not convert aviation into ‘clean transportation’. E-fuel SAF may qualify, given its near elimination of life cycle emissions due to its use of renewable electricity and carbon capture. SAF purchases and investments, however, would qualify under ‘Sustainability-Linked Loan Principles’ (SLLPs), even using a gross carbon intensity link because SAF reduces gross emissions and is not regarded as an offset.

How can airlines prepare to raise sustainable finance?

In Figure 7 at the end of this article, there is a comprehensive sustainable finance checklist that airlines can use to prepare themselves for raising sustainable or sustainability-linked finance from designing the sustainable financing framework based on its sustainability strategy to launching specific loan and bond transactions.

Although the checklist may appear quite long, most companies that have committed to net zero emissions by 2050 should already have most of the information needed. The amount of effort and due diligence will vary depending on the size of the airline, whether or not it is publicly listed, the amount of funding being sought and the type of financing. A private loan or facility from a relationship bank or group of banks should require relatively little workload. A publicly listed bond issue by a large airline will require substantial internal and external resources because of the increased scrutiny of public issues by investors, regulators, stock exchanges, rating agencies and other analysts.

The sustainable financing process has three steps:

1. Formulate a Sustainable Financing Framework.
2. Obtain an independent external verification of the Framework.
3. Launch financing transaction.

Formulate a Sustainable Financing Framework

In order to access sustainable or sustainability-linked financing, an airline will need to first establish a sustainable financing framework. This document of 15 to 20 pages should explain the company’s sustainability strategy, the purpose of the financing and how it intends to report on the progress of its strategy. If the financing is sustainability-linked, the financing framework will need to identify its key sustainability performance targets (SPTs) and calibrate these with their historical performance. Good examples of these frameworks are those of Air France-KLM, Japan Airlines and Volaris.

The framework should be aligned with the relevant global financing principles depending on the type of financing – e.g. Green Loan Principles (GLPs) by the LMA, Green Bond Principles (GBPs) by ICMA, Sustainability-Linked Loan Principles (SLLPs) by the LMA and Sustainability-Linked Bond Principles (SLBPs) by ICMA. There may also be regional or country-specific sustainable financing principles and taxonomies that an airline may have to align to. ICMA also produces a helpful Climate Transition Finance Handbook.

The sustainable financing framework should include the following components in order to be compliant with the above principles:

• Company overview.
• Key sustainability issues for the aviation sector.
• The airline’s global corporate sustainability strategy and roadmap to net zero.
• The airline’s sustainability governance.
• Rationale for raising sustainable finance and proposed use(s) of proceeds.
• The relevant financing principles to which the proposed financing will be aligned.
• Selection of key sustainability performance indicator(s).
• Calibration of sustainability performance targets (SPTs) to the baseline and historical data as well as projected performance, including the action plan to achieve SPTs, the key risks that may impact the ability to meet targets and circumstances under which the baseline or SPTs can be amended.
• Characteristics of the proposed financing, including how the interest rate, fees and other components of the financing are linked to the SPTs if a sustainability-linked financing.
• Reporting of performance to the SPTs.
• Verification pre-issuance of the alignment of the framework to the relevant sustainable financing principles by an independent third party.
• Verification post-issuance of annual performance to the SPTs by an external auditor.

Obtain an independent external verification of the Framework

As mentioned above, independent external verification is generally required both pre- and post-issuance. Pre-issuance verification is required that the Framework and proposed financing are aligned with the relevant sustainable financing principles. This is often known as a ‘second opinion’.

Green financing instruments

For green loans and bonds, pre-issuance verification is required of the issuer’s alignment to the four main green loan and bond principles. These principles are designed to ensure that the proceeds are only for specific green purposes and that there is no leakage of funds to non-sustainable uses.

• Use of proceeds alignment to one or more of the ten Green Project categories (renewable energy, energy efficiency, pollution prevention and control, environmentally sustainable management of living natural resources and land use, terrestrial and aquatic biodiversity, clean transportation, sustainable water and wastewater management, climate change adaptation, circular economy and green buildings).
• Process for project evaluation and selection based on an airline’s sustainability objectives.
• Management of proceeds in terms of dedicated accounts for green purposes, internal processes and any intended types and duration of temporary placement of unallocated proceeds.
• Reporting on a timely basis of the allocation of proceeds to green projects and their expected and achieved impacts.

For a green revolving credit facility (RCF), it is particularly important that it is not used even partly for general corporate purposes and therefore the RCF’s flow of funds must be closely segregated from other funds, tracked and reported.

Sustainability-linked instruments

For sustainability-linked loans and bonds, the main purpose of verification is to assess the relevance of and performance to the selected sustainability performance targets (SPTs) and their linkage to the terms of the financing:

• Selection of key performance indicators (KPIs).
• Calibration of sustainability performance targets (SPTs).
• Financing characteristics.
• Reporting.
• Verification.

For publicly listed bonds and syndicated loans, a well-known external agency should be used to undertake verification. Examples are firms such as MSCI, S&P Global, Sustainalytics and Vigeo Eiris. Airlines with publicly listed equity should also seek verification from such agencies, even if the financing is private.

For private transactions for a non-listed airline, such as a loan or RCF from its main relationship bank or banks, global agencies are not necessary. Suitable alternatives could be the airline’s external auditor or a local verification agency. In cases where the banking relationship is very strong, a simple attestation by the airline of adherence to sustainable financing principles may be all that the bank requires.

Launch financing transaction

Once the sustainable financing framework and its verification or second opinion have been published, an airline can then proceed with normal issuance formalities, such as term sheets, loan and facility agreements, other documentation and prospectuses (if a public bond issue). Importantly for sustainability-linked financing, the issuer’s documentation will need to make explicit the formula by which one or more of the payment terms (interest rate, fees and principal repayments) would vary (e.g. step-up and step-down) depending on the company’s performance to its SPTs.

Figure 7: Sustainable Finance Checklist

Sustainability Strategy and Governance	Issuer’s sustainability strategy: 1. Corporate purpose 2. Materiality assessment of business model and key sustainability issues and risks (large and listed companies only, and if available) 3. Climate transition strategy 4. Other ESG objectives (if appropriate)
	Roadmap(s) to net zero emissions by 2050: 1. Scope 1 2. Scope 3 (if appropriate) 3. Carbon removals (if appropriate)
	Intermediate targets by year up to 2030, every 5 years to 2050: 1. Carbon intensity 2. Percentage next-generation aircraft in fleet (if appropriate) 3. Percentage SAF uplift (if appropriate) 4. Other ESG targets (if appropriate)
	Scientific validation of alignment of roadmaps and targets with the Paris Agreement
	Sustainability governance – roles of Board, Board sub-committee, CEO, management committee, ESG team
	Disclosure frameworks (if available and if required to be reported) – e.g. TCFD
Sustainable Financing Framework	Rationale for financing and use(s) of proceeds
	Relevant financing principles: 1. LMA SLPs and GLBs 2. ICMA SLBPs and GBPs 3. Other country or region-specific principles/taxonomies
	Selection of key performance indicator(s) (KPIs): 1. Metric(s) 2. Scope 3. Methodology for calculation and sources of data 4. Alignment with relevant UN SDGs and other country or region-specific ESG objectives
	Calibration of sustainability performance target(s) (SPTs): 1. Historical performance by year 2. Baseline year selection and rationale 3. Future targets by year or every 5 years 4. Strategies and action plan to achieve SPT(s) 5. Key risks to achieving SPT(s)
	Characteristics of the financing: 1. Target determination dates/years for SPT(s) 2. Linkage of interest rate, fees and principal repayments to SPTs 3. Recalculation policy of baseline and/or SPT(s) in the event of unforeseen major events/changes
	Performance reporting process: 1. Relevant information to be reported 2. Frequency of reporting 3. Disclosure of reports (e.g. annual report, website)
	Verification: 1. Identity of third-party verification (second opinion) providers 2. Verification of the framework’s alignment with financing principles and contribution to sustainability 3. Post-issuance verification of performance to SPT(s)
Specific Financing Transaction	Amount and use(s) of proceeds
	Formula linking interest rate, fees and principal repayments to SPTs
	Term Sheet (non-binding)
	Loan or Facility Agreement (binding)
	Finance, JOLCO or Operating Lease Agreement
	Other documentation – e.g. syndicated loan agreement, underwriting agreement, bond indenture, global note, paying agency agreement, legal opinion, auditor comfort letter, etc.
	Prospectus or Offering Circular (for bonds and listed securities)