MUFG, acting as Joint Lead Placement Agent and ESG Structuring Agent, on February 13 priced the world's first ESG-linked issuance with two-way pricing and the world's first ESG-linked USPP issuance for Australia's largest airport, Sydney Airport Limited (ASX SYD.AX).

The market for sustainable financing is developing rapidly in Australia, with a range of sustainability-linked loan issuances occurring throughout 2019, including Australia's first multi-bank ESG linked loan established by Sydney Airport. To date, however, there have been no issuances from borrowers in the US Private Placement market with a sustainability or ESG linkage where coupon payments can vary two-ways according to the performance of the borrowers' sustainability and ESG metrics.

Sydney Airport has now priced a highly successful A$600m (equiv.) transaction, with tenors from 15 years to 30 years, including a world's first 20-year ESG linked tranche. As part of the ESG-linked US Private Placement 20-year tranche, coupons can vary up or down periodically depending on Sydney Airport's performance against its sustainability metrics over time, as assessed by an independent third party, Sustainalytics; a global and leading specialised investment research and ratings provider.

Matthew Carr, MUFG's Managing Director and Head of Debt Capital Markets for Australia and New Zealand, commented:

"MUFG is delighted to have again assisted Sydney Airport in a highly successful and competitively priced US Private Placement issuance with a focus on lengthening its debt tenor and facilitating direct Australian dollar investment.

We are proud to have priced the world's first ESG-linked tranche and to have partnered with Sydney Airport and USPP investors over the course of many months; from original concept through all structural aspects and ultimately an outstanding outcome providing a direct link between the Airport's sustainability performance and its funding costs."

Michael Momdjian, Sydney Airport's Group Treasurer, remarked:

"We are proud to partner with MUFG to deliver a highly successful and innovative USPP transaction, including a world first that further exemplifies our leadership in moving loan and bond markets forward, while also reinforcing our commitment to sustainability. "

As a part of its Sustainable Development Goals, MUFG is aiming to provide a cumulative total of 20 trillion Yen (~A$270 Billion) in Sustainable Finance between FY19 and FY30 to help build a sustainable society through the provision of financial services to its clients.

Commenting on the deal, Drew Riethmuller, MUFG's Head of Global Corporate and Investment Banking, Oceania, said:

“MUFG is committed to developing long lasting relationships with its clients and shared sustainable growth.

"From MUFG's perspective, it is a privilege to work with Sydney Airport on a transaction that very clearly demonstrates not only innovation, but also one that represents a clear alignment of ESG objectives between the two organisations."