Skift Travel News Blog

CitizenM raised $500 million (€480 million) from HSBC UK, HSBC Continental Europe, ABN AMRO Bank N.V., and Aareal Bank with a sustainability-linked loan, becoming one of the first European hospitality companies to adopt such financing arrangements.

The new funding incorporates specific environmental, social and governance (ESG) goals as part of the push for greener travel. For CitizenM, this will target reducing operating carbon emissions and improving green building certifications for its European-owned hotel assets.

“We’re very proud to have completed this deal with citizenM,” said Elizabeth Davies, head of hotels at HSBC UK. “With its high profile in the hospitality sector, we expect that CitizenM’s relatively early adoption of the sustainability linked loan will help to drive further market adoption, as hospitality groups seek to demonstrate a serious commitment to creating positive impacts on the environment.”

Accor announced a similar refinancing arrangement in November 2021 with a bond issue indexed to the group’s sustainable development goals.

Many large hotel companies have set or submitted plans for improving sustainability by reducing their greenhouse gas emissions. Hotel investors are increasingly turning their attention to climate risks and carbon-reduction efforts in their portfolios.

Trip.com Group said on Friday it had tapped a $1.5 billion sustainability-linked loan facility, meaning that the financing terms link the debt’s interest rates to the Chinese online travel giant’s performance against specific environmental targets.

The Shanghai-based company will use three-year dual-tranche term loan facility to refinance some of its debt, and the rest for general corporate purposes.

The move appeared to be the first time a major online travel player adopted green finance. Last year, a shareholder initiative prodded Booking Holdings to do a climate change report. The report came out this year. In October, the company said its Booking.com brand would add emissions estimates to bookings soon. Trip.com-owned Skyscanner has estimated flight emissions for consumers for a few years.

Climate-related risk is on investors’ minds as they look at their portfolios. For travel in general, the sustainability-linked bond may provide more flexibility for investors worried about this issue, said Leslie Samuelrich, president of Boston-based Green Century Capital Management. Sustainability-linked bonds are different from green bonds. They set macro targets for a company, while green bonds commit to specific projects.

The investment concept is growing fast, Samuelrich said. Last year, lenders issued $103 billion in sustainability-linked bonds to companies across various industries. The year before that, it was about $12 billion.

In April, Ascott Residence Trust issued a sustainability-linked bond — apparently the first in the hotel sector — worth about $143 million ($200 million Singaporean). Ascott Residence Trust has committed to a sustainability performance target of greening half of its total portfolio by 2025, and its interest rates would essentially rise on the loan facility if it fails to meet the target.

The process remains murky and slow burn, though. There’s a debate about measuring the greenhouse gas emissions contributing to the climate emergency. IFRS Foundation, the international accounting standards-setting body, has this year been working on setting standards for emissions-focused reporting. Their work, and the work of other organizations, will adjust how investors evaluate climate risk — a knotty task inviting skepticism from some critics.

Side note: Trip.com’s chief commercial officer Schubert Lou will talk about the international division of Trip.com Group at Skift Global Forum East in Dubai on Dec. 14.