COP27 concluded this month in Sharm El-Sheikh, Egypt, marking a renewed commitment to climate action. Among the myriad topics discussed - from financing a climate change 'loss and damage' fund to scaling up support for climate adaptation - was the just transition to sustainable mobility. For aviation, this centred around the decarbonisation of the sector.
Speaking during a COP 27 round table, the International Civil Aviation Organisation's (ICAO) Council President, Salvatore Sciacchitano, presented the ICAO Assembly's goal to reach net-zero emissions from air transport by 2050. According to ICAO, collective action among all aviation stakeholders is required to reach this emissions reduction target, although ICAO stressed the importance of taking into account and recognising each Member State's capabilities and ability to contribute.
While collective "substantial and sustained investment and financing" is slated to be a key driver in aviation decarbonisation, what does this really mean, what might it look like and, crucially, where will this money come from?
In part driven by their own ESG priorities, perhaps we will see financiers offering more financial incentives to their customers based on their customers’ emissions reductions initiatives, including investing in “best in class” aircraft types and increasing the use of sustainable aviation fuels. However, while environmentally-linked financing terms may provide an economic incentive to reduce carbon emissions, this will only go so far. It is clear that technological advances are also needed in the aviation sector – whether in terms of more fuel efficient aircraft design or a fundamental shift in fuel technology – and such technological advances come at a cost. The broader finance community – from banks, investors and dedicated funds to other sources of finance, including governments – will therefore have a key role to play in providing, enabling and incentivising the finance required to fund the investment, and research and development into, new and greener technologies.
While there are plenty of reported investments into new and alternative technologies in the aviation sector, and a number of sustainability-linked aviation financings have been announced over the last year or so, it is clear that there is still a long way to go for the aviation industry to achieve its net-zero goal by 2050. It will be interesting to see how the finance industry works with, and supports, the aviation industry to reach its goal. Echoing ICAO, collective action is crucial to achieve these targets.