Report on the (E)ESG market - February 2021

February 2021

[Contact me for copy; executive summary below]

⏤(Economic/Employee/Ethical) Environmental, Social and Governance (“(E)ESG”) and Sustainable Development Goals (“SDG”) will continue to grow in relevance in the overall market and in aviation in particular
⏤Within aviation (and some other sectors), ESG-SDG clear, consistent standards do not exist at present – other than committing, under the Paris Agreement, to show a contribution to a 2° C reduction in global temperatures by 2050
⏤ There is a lack of agreement over what to measure and how to measure and how to determine if a transaction is “green” and if so, what ”benefits” does – or should – that provide
⏤Within aviation, the focus is on “Environment”; given aviation makes up ~2% of greenhouse gas (“GHG”) emissions and was expected to grow as more people would fly and other sectors would see reductions in emissions. At present, aviation is a “transition sector” - there is no immediate, viable path to zero-emission flying. Little consideration is made to ”S” or “G”
⏤Focus up until now has been on airlines and to some degree, manufacturers; expect the focus to shift to lessors which now represent ~50% of the commercial market; ESG investors will increasingly focus their attention on financing polluting assets
⏤The industry needs to develop a simple, transparent framework to determine which data points to measure, how to measure and report them, how to “prove” targets have been met and how to “benefit” from achieving ESG-SDG goals
⏤Industry should be encouraged to move to zero carbon emissions based on technology as it develops; in the meantime, there should be incentive and encouragement in net zero emissions for investing in tech, buying carbon offsets, buying fuel efficient aircraft, using SAF and operating more efficient flights
⏤ Airlines and lessors should look to other transition sector ESG bonds and loans but should keep in mind “Greenwashing”