Grantham Research Institute at the London School of Economics has conducted a study to uncover which airlines are reducing their environmental impact, concluding that none of the world’s 20 biggest publicly traded airlines is doing enough to tackle climate change.
The airline sector currently accounts for two per cent of global CO2 emissions and 12 per cent of transport-related CO2 emissions. Indeed, the International Air Transport Association (IATA) predicts that the number of air travel passengers will double to 8.2 billion by 2037, and David Russell, Head of Responsible Investment at USS Investment Management Ltd, emphasises this: “The airline sector is one where emissions – and therefore exposure to climate policy risk – are predicted to grow.”
The research, which was funded by asset-owner led Transition Pathway Initiative (TPI), highlighted that ‘none of the world’s top 20 airlines currently have a target that clearly specifies how it will reduce its own flight emissions after 2025’ and so fall short on the Paris Agreement goal of limiting global warming by 2°C. The research was backed by over US$13 trillion of investors, including the London Environment Agency Pension Fund, BNP Paribas and Legal & General Investment Management.
The study noted that the airlines that currently have the highest CO2 emissions are ANA Group (Japan), Japan Airlines, Korean Air and Singapore Airlines, though it is worth noting that Delta, United, Lufthansa and ANA Group are all leading in terms of their carbon ‘Management Quality’ score. EasyJet is the only airline with a CO2 emission intensity of flights below the 2°C benchmark post-2020 – however, in terms of ‘Management Quality’, it sits at level 2 – ‘Building Capacity’.
Still, small efforts offer little compensation at this stage (the average Management Quality score for the sector is 2.4 out of 5 – lower than both the automotive and electricity sectors) and the study raises concerns that the airlines’ strategies rely on carbon offsetting rather than reducing their own flight emissions. Faith Ward, Co-chair of TPI, said: “Offsetting is no substitute for a clear strategy to reduce emissions, and the International Energy Agency’s carbon budget for air transport excludes the use of offsets. The aviation sector is doing the basics when it comes to carbon performance, but investors are urging them to take more significant steps as they judge which airlines are most likely to survive the turbulence of the transition to a low carbon economy.”
Offsetting is not the only hurdle that airlines face when building a corporate strategy that will appease the investors: some, such as Delta and Lufthansa, have also met demands for strategies that link climate change targets to executive pay. David Russell commented: “The sector has to be able to explain to its investors how it will manage the shift to a lower carbon future. The analysis shows that whilst some in the sector are treating this issue strategically, others have some way to go.”
Helena Viñes Fiestas, Deputy Global Head of Sustainability at BNP Paribas Asset Management, added: “The aviation industry clearly has a range of actions it can take to respond to climate change – improved energy efficiency, bio fuels and offsetting, amongst others. As investors, we need clarity about the contribution each of these will make – and, critically, how much they will cost – if the sector is to make its contribution to the goals of the Paris Agreement.”
Efforts towards reducing the impact of global warming should be nothing short of colossal at this stage in the game. That so few airlines have stepped up to the mark highlights a problem inherent within the industry – there are very few carbon-neutral alternative technologies available in terms of commercial air travel, a fact which isn’t likely to change any time soon. Airlines need to act fast to reduce their own flight emissions if they wish to uphold an environmentally and economically sustainable business model.
To read the full report, click here.