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Aviation’s climate footprint, investors' wake-up call to action

The aviation industry has been under growing scrutiny from public opinion because of the carbon footprint of its operations which grew globally at an annual rate of 2.8% between 2008 and 2018 according to ICCT data[1]. Youth-driven movements such as “flying shame” (“flygskam,” in Swedish) are putting pressure on the industry. In the UK, plans for a third runway at Heathrow airport have been ruled illegal over climate change. As shown by a recent report from ODDO BHR SRI Team[2], efficiency gains over the same period have been outpaced by air traffic growth. As air transport is projected to surge in the 21st century, the current trajectory may undermine the global crusade against climate change.


In this context, the Principles for Responsible Investment (PRI), in consultation with investors engaging airlines and aerospace companies via the Climate Action 100+[3] initiative, have developed “investor expectations on climate change for airlines and aerospace companies”. Publicly launched in February, this “investor expectations” statement has gathered the support of 122 investors, including prominent pension funds like US based CalPERS, USS in the UK, Dutch APG, Swedish AP4 or French Ircantec, as well as large asset managers (Ostrum AM, AXA IM, Candriam). The statement outlines “guiding standards” that will support airline and aerospace operators in handling climate-related risks and transitioning to a low-carbon economy. One cardinal focus is the need for a strong governance framework that explicitly delineates the board’s responsibility and policy on climate change and the need to enshrine the risks and opportunities arising from climate change into company strategy. Next to this, is the desire for the establishment and disclosure of robust transition plans aligned with the Paris Agreement.  


Crucial issues such as intermediary milestones for reaching net-zero emissions by 2050, granularity of carbon emissions across the entire value chain, and going beyond carbon offsets are emphasized. This can be seen as evidence that investors are keen on tangible and monitorable targets that will not only spur results but also help to distinguish laggards from high performers. They also expect bold corporate disclosure based on the final recommendations of the TCFD.  


In addition to the foregoing, it is clearly stated that robust strategies, resources, and programs for transitioning solutions such as alternative fuels and technologies for the sector should be established and disclosed. The importance of this cannot be over emphasized especially since the industry has been slow to mobilize significant resources for R&D. For the last ten years, the investment of Airbus devoted to R&D has been on a constant decline as opposed to a sector that faced stringent emission regulation, the European car-making industry (see the chart below).


[1] ICCT, CO2 Emissions from commercial aviation, 2018

[2] ODDO Sustainability Research (2019). Aviation: CO2 – a threat to the industry’s license to grow

[3] Climate Action 100+ is an investor collaborative engagement initiative that aims at tackling climate mitigation strategies of the 100+ largest greenhouse gases emitting companies around the world.

Although there is no defined timeline nor legal obligation to comply with these expectations, one thing is certain — investors have given a wake-up call and those active in the Climate Action 100+ should be willing to see these expectations quickly implemented by companies in the sector. Airline and aerospace companies should respond with game changing solutions to advance the global combat against climate change, which will be a difficult challenge when considering the long-term industrial cycles of the sector and the high share of leisure travel. Carbon cuts must be allocated across sectors depending on the existence of affordable low-carbon substitutes or alternatives but also with regards to the social value of their end-use. Whereas mobility is unarguably an enabler for meeting fundamental human needs, the necessity of international tourism is more questionable.