Six global financial institutions chart a flight path to aviation decarbonization

Six of the major aviation lenders – Bank of America, BNP Paribas, Citi, Crédit Agricole CIB, Société Générale and Standard Chartered – have announced that they will partner with RMI’s Center for Climate-Aligned Finance to help decarbonize the aviation sector through the formation of the Climate Aligned Aviation Finance Task Force. The task force aspires to create a collective climate-aligned finance (CAF) framework that defines common goals for action for the decarbonization of the aviation sector. The CAF Framework is a commitment by participating financial institutions to assess and disclose annually, in accordance with the United Nations-convened Net-Zero Banking Alliance, the extent to which greenhouse gas emissions from aircraft, airlines and donors they fund are compliant with 1.5°C Climate Goals.

The task force aims to create an industry-backed CAF framework before the end of 2022. The framework will create consistency and transparency in reporting, setting a level playing field for measuring progress against climate goals . With the CAF framework, financial institutions will be able to assess the emissions of their aviation loan portfolios and work with their customers to report their emissions, finance low-carbon solutions and support investments in new technologies.

The aviation sector accounts for 2.5% of global CO2 emissions and air traffic is expected to increase significantly until 2050. In a business as usual scenario, aviation alone could use up to 10% of the planet’s remaining global carbon budget by 2050. The aviation sector has launched efforts in response, including the International Air Transport Association’s commitment to net zero emissions by 2050 To support these goals, the aviation sector is seeking to invest in more efficient aircraft, support the development of new aviation technologies and accelerate the transition to sustainable aviation fuels (SAF). The financial sector will play a crucial role in financing the technologies, projects and companies involved in this transition to net zero.

The working group includes senior members of the aviation team from each participating financial institution and will be facilitated by the Center for Climate-Aligned Finance. The working group will forge the measurement methodologies, emissions benchmarks, data pathways, reporting and governance structure of the CAF framework in collaboration with existing decarbonization initiatives. The task force will invite other financial institutions to adopt the CAF framework by the end of the year and help define global climate best practices for aviation financing.

Financial institutions wishing to stay abreast of the process and provide feedback during development are encouraged to join the review group. To learn more, financial institutions should submit an expression of interest.

The Center for Climate-Aligned Finance will facilitate engagement between the Task Force and key partner organizations focused on aviation and sustainable finance to ensure that the goals of aviation companies and their financial partners are aligned and achievable. Partner organizations include the Glasgow Financial Alliance for Net Zero, including the Net-Zero Banking Alliance (NZBA) and the Clean Skies for Tomorrow coalition. The Centre’s partnership with NZBA has already helped to inform banks’ approaches to decarbonization in hard-to-reduce sectors and align with a 1.5°C trajectory.

The CAF framework for aviation will be based on the experience gained through the Poseidon principles for maritime transport and the soon-to-be-launched CAF agreement for steel. The Poseidon Principles were launched in 2019 with 11 signatory banks. Today Poseidon has 29 signatories covering more than 50% of global ship financing. The CAF Aviation Framework is intended to be designed for similar rapid adoption by aviation financiers globally.

Comments Members of the working group:

Dan Melaugh, Managing Director, Airlines Global Corporate & Investment Banking at BofA Securities, said: “As the first global financial institution to define an SAF Capital Utilization and Deployment Commitment, the Funding Task Force aligned with aviation climate builds on our commitment to climate finance. solutions. It is critical that we drive innovation and chart a decarbonization pathway for aviation, and we are honored to contribute to this RMI effort.

Bertrand Dehouck, Head of Transportation Capital Markets at BNP Paribas, said: “We are aware that aviation is a sector for which greenhouse gas emissions will be difficult to reduce. We are keen to work with RMI and our partners in the Aviation Climate Aligned Finance Task Force to establish a robust framework to measure the carbon intensity of our aviation finance activity and to set targets for climate alignment. Our goal is to help frame our Net-Zero Banking Alliance commitment to support our customers in their own transition.

Munawar Z. Noorani, Global Co-Head of Aviation at Citi, said: “Despite the many challenges facing the global economy, we must maintain the strong positive momentum in addressing climate risks, especially in hard-to-reduce sectors such as aviation. . Following previous partnerships with RMI’s Center for Climate-Aligned Finance focused on the shipping and steel industries, Citi is excited to partner again with RMI to develop a framework to measure and report emissions related to aviation financing. Through this initiative, we seek to further support the decarbonization goals articulated by the Net-Zero Banking Alliance, of which Citi is a member.

José Abramovici, Global Head of Asset Finance Group at Crédit Agricole CIB, said: “We are very pleased to be a founding member of the Aviation Climate-Aligned Finance working group with RMI and other leading aviation banks. Our intention is to provide a strong and effective framework for the benefit of all aviation finance stakeholders, including banks, investors, airlines and lessors. We firmly believe that decarbonization is key to securing the long-term future of the aviation industry. »

Yann Sonnallier, Global Head of Aviation Finance at Societe Generale, said: “As a founding member of the Aviation Climate-Aligned Finance working group, our ambition is to help define a clear and transparent trajectory in a short timeframe. consistent with the objectives of the Paris Agreement, to the benefit of all players involved in the air transport industry. After the Poseidon Principles for Shipping and the Steel Initiative, Societe Generale is proud to be part of the driving force to shape the future of a carbon-free aviation industry.

Kieran Corr, Global Head of Aviation Finance and CEO Ireland, Standard Chartered Bank, said: “Standard Chartered is committed to sustainable social and economic development through our business, operations and practices. communities. We are delighted to be working with RMI as a founding member of the CAF Task Force, alongside other leading aerospace banks, to lead the way and develop a robust framework for aviation’s path to decarbonization.

James Mitchell, director of the Center for Climate-Aligned Finance, said: “Our work in shipping, steel and now aviation shows that collaboration is key to meeting climate commitments and decarbonizing hard-to-cut sectors. We commend the Task Force banks for taking this important step towards creating a global platform to accelerate the decarbonization of the aviation sector. The hard work starts now.

Marianne R. Winn