As pressure mounts on the aviation sector over carbon emissions, the Aviation Working Group (AWG) has established a working group to review Environment, Social and Governance (ESG) issues and their impact on aviation finance, which will focus on developing tools and metrics to help lessors and financiers to better understand the impact of new regulatory developments such as ICAO’s CORSIA initiative.
While the aviation sector only accounts for 2% of current human-related global carbon emissions, according to figures from the Air Transport Action Group, this is predicted to increase significantly over the next decade as other major CO2 emitters such as power producers are likely to reduce their emissions, while the airline passenger growth is slated to increase by 4% year-on-year.
CORSIA’s offsetting requirements are likely to result in significant costs for airlines and a number of European countries are considering additional taxes such as Germany’s national air traffic tax which comes into force in April 2020 and will result in short-haul tax costs in the country increasing by 74%.
In a statement, the AWG said that the working group would look to assess, provide information, and initially take action on ESG issues as they relate to aviation financing and
leasing. While AWG didn’t give precise details of the working group’s remit, it said that this may include the development of metrics and methods to track emissions, and their potential CORSIA-related liabilities, and develop principles for reporting and documenting these for aviation financing and leasing.
AWG has retained Clifford Chance and Watson Farley & Williams as co-counsel to advise it on its ESG initiative.