Banking on sustainable business aviation
The Net Zero Banking Alliance (NZBA) should help business aviation to reduce its environmental footprint at a time of greater scrutiny. Words: Marie-Laure Gassier
SUSTAINABLE PRACTICES ARE becoming a driving concern, inspiring leading principles for most of organisations and activities in Europe. Business aviation is no exception. Although the industry issued guidelines in 2009 – in the form of the Business Aviation Commitment on Climate Change – a clearer strategy with public commitment and measurable targets is now needed.
Business aviation has been under the spotlight lately because it has experienced a spectacular rebound in the post-Covid era, with unprecedented utilisation rates. Also, although the industry’s carbon emissions are estimated at only 0.04% of global man-made emissions, they are perceived as unnecessary and a symbol of unacceptable social inequality.
If the sector is to continue to deliver economic, business and social benefits, its ability to meet the global challenge of cutting emissions and achieve responsible growth are critical. Setting up a strategy is a necessity to protect the environment as much as the industry itself.
Speaking with one voice and coordinating the efforts of all the stakeholders is not an easy task. The multiple initiatives of the sector (such as cutting-edge technologies and greater fuel efficiency) are not quick enough to produce meaningful results now. Also, the support of EU regulation should not exempt the industry from its urgent and direct responsibility.
The European Commission, in its efforts to fight climate change, put in place in 2020 a set of policy initiatives known as the Green Deal, requiring EU countries to meet the objectives of ‘net zero’ carbon emissions by 2050. Financing institutions should in turn exercise their influence on their financed activities to reach this target. The fact that business aviation emits very little is of no importance since the sector will be included in the global strategy for aviation. This is to be considered as an opportunity: it should help the industry to adopt a clear, consistent and coherent roadmap to improve its performance.
Marie-Laure Gassier, BNP Paribas, says it’s important business aviation meets the key challenges of cutting emissions and delivering growth in a responsible way.
The availability of Sustainable Aviation Fuel (SAF), even
through a book-and-claim system, is an important way
to decarbonise aircraft use, according to BNP Paribas.
The availability of Sustainable Aviation Fuel (SAF), even through a book-and-claim system, is an important way to decarbonise aircraft use, according to BNP Paribas.
Sustainable finance – defined as investment decisions that take into account environmental, social and governance (ESG) criteria – will be a major driver of change. Since the signature of the Paris Agreement in 2015 and more recent reports of the Intergovernmental Panel on Climate Changes (IPCC), the entire financial system is increasingly involved and mobilised towards the objective of the maximum 1.5°C variation of the Paris climate goals. Indeed, the role of financing institutions is unique since the banks, through credit and investment decisions, can stimulate and support the transformation of companies and influence their clients’ strategy and decisions.
“It is a decisive step in the mobilisation of the financial sector for climate.”
Adopted in 2015, the Paris Climate Accords is an international treaty on climate change. It aims to respond to the danger of climate change through, among other things, making finance flows consistent with achieving low greenhouse gas emissions and climate-resilient development.
Among the various initiatives undertaken by the finance sector, the Net Zero Banking Alliance (NZBA) deserves particular attention. NZBA is an industry-led initiative, UN-convened, intending to mobilise the financing sector for the climate. Launched in April 2021, with BNP Paribas as one of its founding members, NZBA brings together a global group of banks (www.unepfi.org/net-zero-banking) representing about 40% of global banking assets. The alliance has emerged as the central initiative for participating banks to frame their efforts to bring down emissions from their lending and investment portfolios to net-zero by 2050. It is a decisive step in the mobilisation of the financial sector for climate.
NZBA members commit to: (i) Transition and align greenhouse gas emissions arising from their lending and investment activities with the path required to achieve carbon neutrality in 2050; (ii) Set 2030 and 2050 targets, with intermediary targets every five years from 2030 onwards; (iii) Focus on the most polluting sectors and play a key role in the transition towards a carbon neutral economy; (iv) Publish annually absolute emissions and emissions intensity in line with best practice and propose actions and climate-related sectoral policies and (iv) Take a robust approach to the role of offsets in the transition plan.
Convened by the United Nations Environment Programme Finance Initiative (UNEP –FI), the alliance acts as a coordination hub for the climate-focused element of the Principles for Responsible Banking. It’s part of a bigger alliance called the Glasgow Financial Alliance on Net Zero (GFANZ). GFANZ (and therefore all member alliances) is accredited to the UN Race to Zero (RtZ) campaign, a global UN-backed initiative, that aims “to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world in time”.
Since 2020, a number of leading European banks published reports to measure the alignment of their credit portfolio with highly carbonised sectors, including transportation, which accounts for 75% of direct greenhouse emissions worldwide. Based on this measure, a trajectory is established to ensure the objectives are met in due time. From the bank’s perspective, alignment could theoretically be achieved by various means. These include: disengaging from the most polluting activities, supporting the transformation of clients’ activities, setting targets for green technologies, incentivising the changes, etc. Beyond these efforts to measure, report and reduce the carbon emissions of the financed sectors and assets, NZBA sends a strong signal to all stakeholders and provides a methodological basis for action.
The use of SAF could cut up to 80% of business aviation’s carbon emissions, says Marie-Laure Gassier.
The business aviation community is composed of manufacturers, operators, service providers such as FBOs, airports, charter brokers, end users and financiers, amongst many others.
Manufacturers are constantly seeking new ways to increase aircraft performance and range, while reducing fuel consumption. Business aviation, at the forefront of innovation, has improved fuel efficiency by 40% over the past 40 years. However, the metrics in terms of carbon intensity are different for commercial and general aviation. It is critical that General Aviation Manufacturers Association (GAMA), which endorsed proposals for a global sector approach to reduce aviation emissions, comes up with metrics to monitor the improvement of carbon emissions from all assets categories including business aircraft.
According to aviation consultancy IBA, carbon emissions per mile and passenger reached their lowest historical level in July 2022. However very significant differences are observed between aircraft and companies on the same destinations. A dependable carbon emission comparator integrated in a global reservation system, which would include business aircraft, would help in making effective comparisons of performances and relevant prices.
“Fly private because it’s greener would be a powerful motto.”
In addition, operators managing aircraft can propose and implement greener ways to use such assets. They optimise flights with direct routes between departure and landing airports (with three times more airports for business aircraft than commercial traffic). The availability of Sustainable Aviation Fuel (SAF), even through a book-and-claim system, is a key way to decarbonise aircraft utilisation, saving up to 80% of carbon emissions. In anticipation of the regulatory pressure regarding the use of a minimum percentage of SAF, some airlines have secured long-term contracts for provision of SAF from the fuel providers. The European Business Aviation Association (EBAA), as an association of operators, could do the same for business aviation and finalise a green label for those offering SAF to customers. It could solve the problem of SAF availability, as supply creates demand.
Finally, and this is key, aircraft owners and users are increasingly concerned about sustainability, especially, but not only, in Europe. Most of the flights are from 90 minutes to four hours and, when some are shorter, this is usually for technical or maintenance purposes. Compensation is often, for the moment, the only available solution to reduce the carbon footprint of flights, with SAF being a scarce resource.
As users need aircraft primarily for efficiency, time saving and business purposes (70% to 80% of private jet flights are for business purposes), they should also be the first to support the transformation of the industry and invest the necessary funds for a sustainable future – within and beyond this sector. Business aviation is a dynamic engine for economic growth and an integral part of the international transport system. Lack of transformation and lack of aircraft and financing could create critical issues.
Financial institutions belonging to NZBA are fully taking part in the process of de-carbonising the industry – showing their commitment to sustainability.
Financing business jets makes them part of the ecosystem. They exercise their influence, raise awareness of the stakeholders and contribute to the sector transformation. For environmental purposes, they should collect data, define metrics, determine trajectories and measure evolution. This is done in coordination with all the stakeholders and relevant metrics for commercial and business aviation.
Despite its powerful contribution, SAF remains scarce. Photo credit: EBAA & NBAA
A business aircraft built in 2050 will be 45% more fuel-efficient than one built in 2005. Electric and hybrid-powered aircraft will be a major innovation for short haul flights. Use of SAF, beyond the minimum regulatory requirements, would be a game-changer. Flight optimisation is a unique advantage. But how do we combine these different aspects?
A sector approach is needed to avoid a patchwork of efforts and improvements, which is difficult to factorise at the industry level. It would be therefore more than welcome, rather than waiting for the regulator to impose constraints or the financial sector to set limitations, for the business aviation industry, represented by International Business Aviation Council (IBAC) and EBAA, to set up a unique platform involving all the key players and build a clear roadmap to reach the objective of net zero emissions in 2050.
This would prove the industry takes a sectoral responsibility over aviation emissions targets. Fly private, because it is greener, would be a powerful motto.
Senior adviser | Business Jets and Yachts Finance | BNP Paribas
+41 (0)75 430 7759