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Head of Capital Markets, International and EMEA
Global Service Delivery Lead – GEM, TMF Group
22 July 2022
Read time
3 minutes

Getting serious about aviation sustainability

In the past decade, sustainability concerns have rocketed up the agenda of commercial aviation, helping to spotlight the wider environmental, social and governance (ESG) policies of industry participants.

Clearly, aviation’s climate change impact commands the most attention, but the public, investors and legislators are also becoming increasingly concerned with other challenges such as representation, transparency and good governance.

The coronavirus pandemic only intensified the trend towards sustainability, as many governments made state aid to airlines contingent on points of ESG compliance. For example, Air France and Lufthansa must publish information on how their multi-billion euro aid packages are used to support EU and national obligations linked to green and digital transformation.

Despite such high profile examples, there is still considerable uncertainty around the ESG agenda, with little in the way of common benchmarks for companies to build policy around.

“There are no universal standards or guidelines in place,” notes Maria Almerud, Global Service Delivery Leader, Entity Management, TMF Group. “Different players suggest different labels and benchmarks so it still looks like it is at the starting stage.”

Net zero

In place of industry-wide targets, many individual airlines and lessors have created their own ESG timetables. In 2019, IAG became the first airline group to commit to net-zero carbon emissions by 2050, a goal that was subsequently picked up by other major carriers and airline trade body IATA.

Yet these are hugely optimistic goals that will be very difficult to achieve without a combination of breakthrough technologies and a reversal of long-term passenger growth trends – leading to questions about how seriously the industry takes its environmental targets.

Set against such concerns are concrete actions such as the development of sustainability-linked financing solutions, heightened OEM development of alternative propulsion technologies and commitments by lessors to electric aircraft. Amedeo, Aviation Capital Group and Falko have all announced deals with electric aircraft manufacturers, while Dublin-based Avolon has ordered – and placed – 500 eVTOL aircraft from Vertical Aerospace for delivery from 2024.

While Almerud agrees that aviation’s net-zero end goal is challenging, she believes it can inspire a series of incremental gains: “Once new solutions become available such solutions will be in demand from investors. When these are optimised we will get closer to the desired goal – it’s more about the journey than the destination.”

Social and governance objectives

Like many industries, aviation shows shortcomings in the representation of women and ethnic minorities at senior management level, though matters are slowly improving.

“This might not be a quick win but there are initiatives to support gender equality and more opportunities for women,” observes Almerud, citing the Women in Aviation International body and IATA’s 25by25 initiative.  “But C-Suite is still predominantly men so there is lots of work to be done.”

On governance, meanwhile, she notes that European and international regulations such as the EU’s Sustainable Finance Disclosure Regulation (SFDR), Non-Financial Reporting Directive (NFDR), and Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) will impact how some airlines approach reporting and transparency.

Shareholders constitute another, growing source of pressure to improve transparency and other ESG considerations. For example, listed lessors will need to show their portfolios will meet sustainability requirements over the lifecycle of the assets, while airlines will also need to justify their fleet choices.

Talk to us

TMF Group has extensive experience in the lease sector and a deep understanding of the many requirements of aircraft lessors. We manage hundreds of aircraft leases in SPVs around the world, working with both established players and new entrants to aircraft finance.

We work with nine out of the top ten global aircraft lessors. Our clients include lessors, banks, airlines, private equity firms and hedge funds. We can provide you with an end-to-end solution that covers setting up and maintaining the leasing structure and supporting the transactions that fund the aircraft purchase.

Our highly regarded experts provide services that are bespoke to your specific requirements, based in every major jurisdiction used for aviation services. This allows us to move more swiftly than our competitors, providing you with an efficient service anywhere in the world. Contact us to find out more.

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