Climate-focused investor engagement initiative Climate Action 100+ and Principles for Responsible Investment (PRI) announced today the release of an updated sector strategy for the aviation industry, outlining actions for investors, aviation companies and the broader sector to take in order to accelerate the transition to net zero and align with a 1.5°C scenario. The report’s major recommendations include dramatically increasing the use of SAF, and demand management to curtail the growth in air travel overall.
The aviation industry has come under scrutiny as a significant source of greenhouse gas (GHG) emissions, responsible for 2-3% of global emissions, with that figure potentially rising dramatically over the coming decades if no action is taken. Several initiatives are being pursued in order to address the climate impact of the industry, typically involving efforts to improve aircraft efficiency, develop sustainable aviation fuels, or create aircraft utilizing low or zero carbon propulsion systems such as electric or hydrogen-based.
Ben Pincombe, Head of Stewardship for Climate Change at the UN Principles for Responsible Investment, said:
“The report shows the scale of what is needed for the aviation industry’s transition to net zero, and highlights that the sector needs to take strong, decisive action now.”
Climate Action 100+ is an initiative, with over 615 investors representing more than $65 trillion in assets, that targets the world’s largest corporate greenhouse gas emitters to promote taking necessary action on climate change and align their business strategies with net zero in order to help limit average global temperature rise to 1.5 degrees Celsius.
The guidelines form part of Climate Action 100+’s Global Sector Strategies, an approach launched last year by the initiative, focusing investor engagement strategies for decarbonization at the sector level, targeting high-emitting sectors, and aiming to foster investor-led sector-level dialogue on reaching global climate goals. The sector strategies are developed by Climate Action 100+’s founding investor networks, including AIGCC, Ceres, IGCC, IIGCC and PRI.
The release follows the launch early last year by the initiative of its first aviation sector strategy. With the new update, Climate Action 100+ draws on analysis from International Energy Agency’s (IEA), aligning with its landmark Net Zero by 2050 analysis of actions necessary to achieve the 1.5°C scenario.
Sustainable aviation fuel is seen by market participants as one of the key tools for the industry to address its climate impact, as it generates significantly lower lifecycle carbon emissions relative to conventional jet fuel. SAF is generally produced from sustainable resources, like waste oils and agricultural residues, or even from carbon captured from the air, rather than from fossil fuels. SAF plays a major role in the new Climate Action 100+ aviation sector strategy, following the IEA scenario requiring 16% of aviation sector energy consumption to come from advanced biofuels, and 2% from synthetic fuels by 2030, compared to less than 0.1% from these sources in 2020. The report notes the massive investments required to meet this demand, citing IATA estimates of between $1 – $1.4 trillion in SAF investment needed through 2050.
The report also focuses on the need for demand management in order to reduce air traffic growth, noting that the IEA 1.5°C scenario calls for business travel to be kept at 2019 levels, long-haul flights longer than 6 hours for leisure reasons to be capped at 2019 levels, and demand to be shifted to high-speed rail where possible.
The sector strategy also guides investors to call on aviation companies to specify the role of carbon offsetting in their decarbonization strategies, with an eye to phasing out offsets, and to set intensity targets alongside absolute emissions reduction targets.
“The industry holds its future in its own hands. As noted in the report, the amount of demand management required depends on the rate and scale of SAF rollout in the short-term, alongside well thought through technology deployment. If the sector fails to respond effectively, it is likely to face significant and rapid regulatory tightening, and ever greater scrutiny and challenge from capital markets.”