ISTAT Jetrader - Winter 2022 - 28

Developments in
ESG Financing
and Thoughts on
Greenwashing
by Michael Halaby, FRAeS
G
iven the number of proffered pathways,
environmental, social and governance
(ESG) assessment (rating) firms, and
reporting standards - coupled with
the lack of laws and regulations - it is
challenging for airlines and lessors to
develop ESG financings in the present
environment. What will be accepted? What will be accused of
greenwashing? This article focuses on realistic and proactive
steps lenders and borrowers are taking despite the uncertain
regulatory road ahead. I will focus less on equity providers
given, in a recent survey I conducted, few of them are
avoiding aircraft as an investment due to ESG concerns.
As we know, the generally accepted goal is to reduce
CO2 emissions to net zero by 2050 in line with the Paris
Agreement, whose objective is to limit global warming to well
below 2, and preferably to 1.5 degrees, Celsius versus preindustrial
levels.
28 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
While numerous governments, including the EU, have
drawn up some net-zero recommendations and various
institutions, such as SBTi, have recommended roadmaps
to net zero, the issue is what can financiers do to help
airlines reduce their Scope 1 emissions (those from owned
or controlled sources, which account for 75-90% of all their
emissions) - and, by consequence, banks' and lessors'
Scope 3 (indirect emissions (not included in Scope 2) that
occur in the value chain of the reporting company, including
both upstream and downstream emissions)?
The " good " news is that, like nature, finance abhors
a vacuum.
In the absence of laws and specific implemented
regulations, this industry, which depends on volatile fuel
prices, needs decarbonization strategies and incentives to be
thoughtful, adaptable, achievable and impactful. While some
airlines have added " S " and " G " elements to financings, the
focus by market participants, given the Paris Agreement, is
ISTAT Jetrader - Winter 2022

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