METRICS FOR SUSTAINABLE AVIATION FINANCE

Abstract

ABSTRACT Aviation generates 2-3% of global emissions and if business continues as usual is on course to produce double these emissions by 2037. Airlines, aircraft and engine manufacturers are under increasing pressure to reduce its contribution to global warming and decarbonize operations in a bid to offset passenger growth. The industry has been working on the four pillars of sustainability goals, namely, Sustainable Aviation Fuels (SAF), New Technology and Design, Carbon Offsets and Reduction, and improved operations and Infrastructure. Further sustainability innovation in the aircraft finance world is gaining momentum with airlines and lessors issuing sustainability-linked securities or the so-called green bonds. While there is a consensus that Environment, Social and Governance (ESG) compliant financing enjoys more investor appetite, there is increasing debate centered on whether and which financing qualifies as green or sustainable. This paper discusses the steps undertaken by the aviation industry to move towards sustainable aviation, current challenges faced by the industry, financial resources available to achieve its goal, and the methodology to score airlines to determine if they qualify to raise sustainable finance. Keywords Sustainability, Aviation, Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), Emission Trading System (ETS), Carbon offsets, Sustainable Aviation Fuel (SAF), biofuels, ICAO, IATA.