Climate Action 100+ recommends its investor coalition – which is collectively worth $65tr – push airlines for ‘strong, decisive action’ on climate change

The global aviation industry could soon be facing growing calls from investors for it to curtail growth in air travel, ramp up low carbon biofuel investment, and clamp down on dubious carbon offsetting schemes, after a leading investor group responsible for $65tr in assets under management set out its climate recommendations for the sector.

Climate Action 100+, an initiative backed by 615 major investors that seeks to push the world’s biggest emitters to decarbonise, late last week updated its aviation outlook setting out how the sector can support the Paris Agreement’s target to limit global warming to 1.5C.

The report aims to align investor thinking with the International Energy Agency’s (IEA) landmark net zero analysis last year, and warns airlines and other aviation sector firms that they must take “urgent action” to help limit global average temperature rise to 1.5C by the end of the century.

Many of the world’s leading airlines and aerospace firms have adopted net zero targets in recent years and are stepping up investment in various low carbon technologies and fuels. However, campaigners have given such commitments a decidedly mixed welcome, warning the sector remains well off-track to meet its stated net zero goals.

Crucially, the new investor-backed report argues that growth in air travel needs to be curtailed, a sentiment long backed by environmental groups but which is likely to face pushback from within an aviation sector that broadly remains committed to continued growth in passenger journeys for the foreseeable future while curbing emissions through the introduction of new fuels and technologies.

The report recommends that in order to encourage aviation firms to engage with the need to curb demand until new low carbon technologies are actually proven, investors should push aviation companies and industry bodies to disclose their growth plans and assumptions, while also calling on policymakers to devise effective demand management plans and policies.

More specifically, business travel and long-haul flights longer than six hours for leisure reasons should both be kept at 2019 levels, the report suggests, and demand should be shifted over to high-speed rail infrastructure where possible.

“While demand management is likely to be unpopular with the aviation industry, the IEA’s scenario indicates that some curtailment of air traffic growth is the lowest-risk, fastest way for the sector to reach 1.5C,” it states.

The report also emphasises that curtailing growth must be accompanied by a “massive, rapid scale-up” of sustainable aviation fuels (SAF) and synthetic alternatives to conventional jet fuels, with a “substantial increase” in the use of low carbon biofuels needed within the next 10 years for 1.5C.

In 2020, less than 0.1 per cent of aviation fuel demand was met by SAF, but the report argues the aviation sector should aim to align with the IEA’s 1.5C scenario, which points to 16 per cent being met by 2030, and a further two per cent from synthetic fuels.

Ben Pincombe, head of stewardship for climate change at the UN Principles for Responsible Investment, one of the coordinator networks for Climate Action 100+, warned that failing to scale up SAF to these levels would mean even stricter constraints on demand growth for flight travel would be needed in future to keep the sector aligned with a 1.5C warming scenario.

“The industry holds its future in its own hands,” he said. “As noted in the report, the amount of demand management required depends on the rate and scale of SAF rollout in the short-term, alongside well thought through technology deployment. If the sector fails to respond effectively, it is likely to face significant and rapid regulatory tightening, and ever greater scrutiny and challenge from capital markets.”

Elsewhere, the report urges investors to push aviation firms to disclose how they are lobbying in relation to policies aimed at reducing emissions, and to ensure trade associations are not blocking stronger regulatory measures to tackle emissions.

And in a bid to combat greenwashing, it highlights the need for the aviation sector to shift its focus from carbon offsetting – a process commonly used by airlines and others in the industry – and towards reducing its own emissions, such as through setting targets to phase-out the use of offsets altogether.

In the meantime, it stresses that CO2 offsets should only be a last resort for tackling aviation firms’ emissions, and argues that if companies have to use offsets they should ensure the projects they support pay for actual removals of CO2, rather than through paying others to emit less, as is common in the world of offsetting.

“The report shows the scale of what is needed for the aviation industry’s transition to net zero, and highlights that the sector needs to take strong, decisive action now,” said Pincombe.

Want to find out more about how the net zero transition will impact your business? You can now sign up to attend the virtual Net Zero Finance Summit, which will take place live and interactive on Tuesday 29 March and will be available on demand for delegates after the event.

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