Photo of Tom Gerritsen, Head of Treasury and M&A.

Royal Schiphol Group uses MMF for short-term ESG integration

The challenge

Royal Schiphol Group targets zero emissions and zero waste by 2030 in its portfolio of airports and holds ambitious ‘energy positive’ and ‘circular airports’ targets for 2050. Elsewhere, the company is striving to improve the balance between communities and the airports it operates and help stimulate sustainable aviation in the sector. Schiphol has launched a significant green bond programme, issuing its first €500m green bond in 2018, with a further €750m issued in April 2020 and €500m in September 2020. The proceeds have and will go to support investment in green buildings and clean transportation around the airports.

For such a large liquidity raise, money market funds (MMFs) were an obvious choice, helping Schiphol achieve instant diversification of assets, high credit quality and access to daily liquidity as needed. Finding a MMF that met the airport operator’s ESG ethos was more of a challenge.

The solution

The Schiphol treasury team was already familiar with MMFs as a short-term investment tool but wanted MMFs with an environmental lens to further strengthen their commitment to the green movement. It led the team to BlackRock’s ICS Liquid Environmentally Aware Funds (LEAF series), launched in 2019 in response to investor demand for more sustainable cash solutions.

Designed to offer capital preservation and liquidity first and foremost, the LEAF series has three components to its sustainable strategy that resonated with Schiphol. A set of exclusionary screens remove short-term issuers that are involved in certain activities including the production and distribution of tar/oil sands, thermal coal extraction and fossil fuel mining, exploration and refinement, alongside a commitment to avoid any issuer that has been involved in violations of the UN Global Compact.

The credit approval process for the LEAF series tilts the portfolio to those issuers with above average environmental practices. To determine eligibility for the LEAF series, BlackRock combines independent ESG data, risk metrics and ratings.

The asset manager has committed that 5% of net revenue from its management fee be used to purchase and retire carbon offsets.

Best practice and innovation

Investing in the LEAF series has allowed Schiphol to create a green, short-term investment loop. Investing the proceeds of green bond issuance into an environmentally aware MMF before allocating the funds to longer-term pieces such as the refurbishment and development of energy efficient buildings ensures green goals are met in the short-term alongside yield.

Key benefits

• A fantastic case study of how green bond proceeds can be invested with the environment in mind, before being allocated to important long-term sustainable projects.
• The strategy offers capital preservation, liquidity and ESG integration.

“Royal Schiphol Group’s ambition is to operate the world’s most sustainable, high quality airports. Our investment in the LEAF series has enabled us to invest our green bond proceeds into a sustainability conscious MMF before allocation, creating sustainable value in both the short and long term,” says Tom Gerritsen, Head of Treasury and M&A.

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