Major Banks Join Forces To Decarbonize Aviation Industry

According to a press release by RMI, which is an independent nonprofit organization of multi-disciplinary experts conducting research on the clean energy transition, major lenders to the global aviation industry, including Bank of America, BNP Paribas, Citi, Crédit Agricole CIB, Societe Generale, and Standard Chartered, are collaborating on developing a collective climate-aligned financial (CAF) framework that will define the common goals to accelerate the decarbonization of the aviation industry. 

The Working Group will be comprised of senior aviation team members from each participating institution and will also be facilitated by the RMI’s Center for Climate-Aligned Finance. Together, they will establish the measurement methodologies, emissions benchmarks, data pathways, reporting and governance structure of the CAF framework and integrate them with other preexisting decarbonization initiatives.

Regarding the project’s timeline, the Working Group is aiming to have it ready and get the industry’s approval by the end of 2022. The formation of the Aviation Climate-Aligned Finance Working Group establishes the institutions’ commitment to performing annual analyses, assessments, and disclosures regarding the degree to which the greenhouse gas emissions from the aircraft, airlines and lessors that they finance are in line with the climate targets of 1.5°C, in compliance with the UN-convened Net-Zero Banking Alliance. Under the CAF framework, the aforementioned financial institutions, as well as new participants, will also be able to analyze the emissions of their aviation loan books and cooperate with their clients to correctly report their emissions and fund lower-carbon solutions that support innovation and the development of new technologies. By designating certain standards of consistency and transparency in reporting, the framework will therefore facilitate the measuring process for the progress towards different climate targets.

Moreover, the RMI Center for Climate-Aligned Finance will act as a liaison facilitating the engagement between the Working Group and key players in the aviation and sustainable finance industries to ensure that the objectives of aviation firms and their financial partners are aligned and realistic. These partner organizations include the Glasgow Financial Alliance for Net Zero, the Net-Zero Banking Alliance (NZBA), and the Clean Skies for Tomorrow coalition. It is worth mentioning that NZBA has already helped inform banks’ approaches to decarbonization in other hard-to-abate sectors and align practices with the 1.5°C goals.

As a foundation for the development of the aviation CAF framework, the experience gained from the Poseidon Principles for maritime shipping and the soon-to-be-launched CAF agreement for steel will be leveraged. The Poseidon Principles were first launched in 2019 with 11 banking signatories and have today grown to 29, covering more than 50% of global ship finance. The aviation CAF framework will also be designed appropriately for similar rapid adoption, as the Working Group will invite other financial institutions to adopt it by the end of the year to set some standard best practices on climate for aviation finance at a global level.

Bertrand Dehouck, Head of Transportation Capital Markets at BNP Paribas, said, “We are conscious that aviation is a sector for which greenhouse gas emission will be difficult to abate. We are keen on working with RMI and our Aviation Climate-Aligned Finance Working Group partners towards establishing a solid framework to measure the carbon intensity of our aviation finance business and to set climate alignment targets. We aim to help foster a framework for our Net-Zero Banking Alliance commitment in view of providing support to our clients towards their own transition.”

James Mitchell, director at the Center for Climate-Aligned Finance, said, “Our work across shipping, steel and now aviation shows that collaboration is key to meeting climate commitments and to decarbonizing the hard-to-abate sectors. We commend the Working Group banks for taking this important step toward creating a global platform for accelerating the decarbonization of the aviation sector. The hard work begins now.”

It is important here to note that the aviation sector accounts for 2.5% of global CO2 emissions, and air traffic is estimated to increase significantly through 2050. In a rather conservative scenario where growth remains at today’s levels, aviation could use up to 10% of the planet’s remaining global carbon budget by 2050. As a response to this concerning possibility, the aviation industry has started to take some action, such as the pledge made by the International Air Transport Association to achieve net-zero emissions by 2050. To achieve this goal, it is necessary for the sector to invest in developing more efficient aircraft and new aviation technology that will accelerate the transition to sustainable aviation fuels (SAF). Given the large capital necessary to launch these research projects, the major lending financial institutions will play a crucial role in this attempt and therefore the Working Group’s CAF framework will definitely be a useful tool.

Sources

  • https://www.finextra.com/newsarticle/40034/global-banks-form-group-to-decarbonise-aviation-industry/sustainable
  • https://rmi.org/press-release/banks-chart-flight-path-to-decarbonize-aviation/

Major Banks Join Forces To Decarbonize Aviation Industry

According to a press release by RMI, which is an independent nonprofit organization of multi-disciplinary experts conducting research on the clean energy transition, major lenders to the global aviation industry, including Bank of America, BNP Paribas, Citi, Crédit Agricole CIB, Societe Generale, and Standard Chartered, are collaborating on developing a collective climate-aligned financial (CAF) framework that will define the common goals to accelerate the decarbonization of the aviation industry. 

The Working Group will be comprised of senior aviation team members from each participating institution and will also be facilitated by the RMI’s Center for Climate-Aligned Finance. Together, they will establish the measurement methodologies, emissions benchmarks, data pathways, reporting and governance structure of the CAF framework and integrate them with other preexisting decarbonization initiatives.

Regarding the project’s timeline, the Working Group is aiming to have it ready and get the industry’s approval by the end of 2022. The formation of the Aviation Climate-Aligned Finance Working Group establishes the institutions’ commitment to performing annual analyses, assessments, and disclosures regarding the degree to which the greenhouse gas emissions from the aircraft, airlines and lessors that they finance are in line with the climate targets of 1.5°C, in compliance with the UN-convened Net-Zero Banking Alliance. Under the CAF framework, the aforementioned financial institutions, as well as new participants, will also be able to analyze the emissions of their aviation loan books and cooperate with their clients to correctly report their emissions and fund lower-carbon solutions that support innovation and the development of new technologies. By designating certain standards of consistency and transparency in reporting, the framework will therefore facilitate the measuring process for the progress towards different climate targets.

Moreover, the RMI Center for Climate-Aligned Finance will act as a liaison facilitating the engagement between the Working Group and key players in the aviation and sustainable finance industries to ensure that the objectives of aviation firms and their financial partners are aligned and realistic. These partner organizations include the Glasgow Financial Alliance for Net Zero, the Net-Zero Banking Alliance (NZBA), and the Clean Skies for Tomorrow coalition. It is worth mentioning that NZBA has already helped inform banks’ approaches to decarbonization in other hard-to-abate sectors and align practices with the 1.5°C goals.

As a foundation for the development of the aviation CAF framework, the experience gained from the Poseidon Principles for maritime shipping and the soon-to-be-launched CAF agreement for steel will be leveraged. The Poseidon Principles were first launched in 2019 with 11 banking signatories and have today grown to 29, covering more than 50% of global ship finance. The aviation CAF framework will also be designed appropriately for similar rapid adoption, as the Working Group will invite other financial institutions to adopt it by the end of the year to set some standard best practices on climate for aviation finance at a global level.

Bertrand Dehouck, Head of Transportation Capital Markets at BNP Paribas, said, “We are conscious that aviation is a sector for which greenhouse gas emission will be difficult to abate. We are keen on working with RMI and our Aviation Climate-Aligned Finance Working Group partners towards establishing a solid framework to measure the carbon intensity of our aviation finance business and to set climate alignment targets. We aim to help foster a framework for our Net-Zero Banking Alliance commitment in view of providing support to our clients towards their own transition.”

James Mitchell, director at the Center for Climate-Aligned Finance, said, “Our work across shipping, steel and now aviation shows that collaboration is key to meeting climate commitments and to decarbonizing the hard-to-abate sectors. We commend the Working Group banks for taking this important step toward creating a global platform for accelerating the decarbonization of the aviation sector. The hard work begins now.”

It is important here to note that the aviation sector accounts for 2.5% of global CO2 emissions, and air traffic is estimated to increase significantly through 2050. In a rather conservative scenario where growth remains at today’s levels, aviation could use up to 10% of the planet’s remaining global carbon budget by 2050. As a response to this concerning possibility, the aviation industry has started to take some action, such as the pledge made by the International Air Transport Association to achieve net-zero emissions by 2050. To achieve this goal, it is necessary for the sector to invest in developing more efficient aircraft and new aviation technology that will accelerate the transition to sustainable aviation fuels (SAF). Given the large capital necessary to launch these research projects, the major lending financial institutions will play a crucial role in this attempt and therefore the Working Group’s CAF framework will definitely be a useful tool.

Sources

  • https://www.finextra.com/newsarticle/40034/global-banks-form-group-to-decarbonise-aviation-industry/sustainable
  • https://rmi.org/press-release/banks-chart-flight-path-to-decarbonize-aviation/

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