Project Details
Project
Volaris Sustainability-Linked Bond Framework Second Party Opinion (2021)
Client
Volaris
Project Type
Sustainability Linked Bond or Note
Industry Group
Transportation
Use of Proceeds
N/A
Location
Mexico
Evaluation Date
Aug 2021
Evaluation Summary
Sustainalytics is of the opinion that the Volaris Sustainability-Linked Bond Framework aligns with the Sustainability-Linked Bond Principles 2020:
Selection of Key Performance Indicators (KPI)
Sustainalytics overall considers the KPI to be very strong given that: (i) it directly measures performance on a relevant and material ESG issue for the Company, applicable to nearly 100% of its Scope 1 and 2 GHG emissions, (ii) its definition is aligned with credible external methodologies such as the Transition Pathways Initiative, and therefore, (iii) supports benchmarking against external emission reduction trajectories.
Calibration of Sustainability Performance Targets (SPTs)
Sustainalytics considers the SPTs to align with Volaris’ sustainability strategy and considers Volaris’ SPTs to be ambitious. The SPT presents a material improvement compared to Volaris’ past performance and also exceeds peer targets. Additionally, the SPT is aligned with TPI’s well-below 2-degree scenario in the medium term.
Bond Characteristics
Volaris has disclosed that any bonds issued directly or through an SPV, such as the Trust Agreement CIB/3249 issuer of asset backed trust notes, pertaining to the Framework will be subject to a penalty (or incentive) for not achieving (or achieving) any of the SPTs as specified in the bond documentation. If Volaris is unable to achieve any of the SPTs on their specified observation date, either (i) the interest rate will increase for the specified coupon dates, or (ii) the redemption price of the bond will increase. Sustainalytics positively notes that the SPTs need to be met at the evaluation dates to avoid an increase in the coupon rate or the redemption price as provided in the bond documentation; however, it does not opine on the adequacy of the penalty imposed for not achieving the set SPTs.
Reporting
Volaris commits to report annually on the selected KPI performance and expects to include the relevant data in the Integrated Annual Report and Corporate Presentations, which will be available on its investor relations website. Where feasible, the Company will aim to include information on the positive sustainability impacts of the performance improvements and any re-assessments or restatements of the KPI or SPTs. This is aligned with the SLB principles.
Verification
Volaris commits to having an external verifier provide a limited or a reasonable level of assurance on the published KPI performance figures at the relevant observation date, which is aligned with the SLB principles on verification.
Climate Transition Finance Handbook
Sustainalytics has evaluated Volaris’ transition governance, strategy, decarbonization targets, and intentions to report on transition progress and finds the Company to be partially aligned with the recommendations of the Climate Transition Finance Handbook 2020. Volaris’ short and medium-term targets are aligned with Transition Pathway Initiative’s (TPI) Shift-Improve scenario, which is consistent with the well-below-2-degree commitment under the Paris Agreement. However, Sustainalytics notes that the Company has not set long-term targets in alignment with TPI’s decarbonization pathway.