Air France, Accor to Pay Bond Penalty for Missing Climate Goals

na7c3330c4}0s7t4ny2rp9tb_media_dl_1.png Bloomberg Intelligence

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(Bloomberg) — Air France-KLM and hotelier Accor SA will need to cough up financial penalties to bondholders because they failed to meet greenhouse gas targets.

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Both firms, along with Australian petroleum retailer Ampol, have missed emissions goals embedded into their sustainability-linked bonds. The upshot is they will have to pay more to bondholders through a mixture of higher coupons and redemption prices.

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It’s the latest example of firms struggling to meet environmental commitments set years ago when talking up net zero goals was in vogue. Now many companies are backsliding on green pledges by abandoning or weakening targets. 

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With sustainability-linked bonds, the interest companies and governments pay is tied to meeting pre-determined environmental, social or governance goals. While the penalties are small relative to the size of these three firms, they at least provide investors some compensation.

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“This shows both that the targets were ambitious and the accountability of the SLB structure,” said Josephine Richardson, head of research at the Anthropocene Fixed Income Institute. She estimates that almost 250 SLBs had 2025 target dates, giving a “status check” on this debt type and its effectiveness.

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The SLB market peaked in 2021 when issuance exceeded $100 billion, according to Bloomberg Intelligence data. Since then, sales have fallen each year, reaching $33 billion in 2025.

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Issuers are now facing increased scrutiny from investors and campaigners over the ambition of targets and the relatively small penalties for missing them. The sector is also suffering from broader political attacks against corporate ESG policies, particularly in the US.

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The three companies, who disclosed their missed targets over the past week, sold their SLBs between 2021 and early 2023. Each failed to meet 2025 emissions goals. They’re not the first to pay penalties in this market, with others including A2A SpA, Enel SpA and Legrand SA among those to miss key targets.

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Air France-KLM failed to reduce its jet fuel greenhouse gas per revenue tonne kilometer by 10% in 2025 compared to a 2019 baseline. In its annual report, it cited various “headwinds” for the miss, including supply-chain constraints, engine issues with newer aircraft, and greater flight times on some routes due to “different geopolitical circumstances.” 

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This results in a higher redemption price for a bond maturing in May, and a coupon increase for a separate security maturing in 2028. The cumulative increased cost amounts to €7.5 million ($8.9 million), according to Barclays Plc calculations. A spokesperson for the airline declined to comment beyond its public disclosure.

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Paris-based hotel group Accor failed to meet two targets: one linked to its Scope 1 and 2 emissions, and the other its Scope 3 emissions. That results in a 0.25% coupon step-up for the two final years on a bond maturing in 2028. The financial cost for each year will be an extra €1.75 million, Accor’s financial statement showed.