News | ESG
Airlines feeling the heat on emissions
The world’s largest publically-owned airlines are not doing enough to fight cli- mate change, research claims. Transition Pathway Initiative (TPI), which assesses how ready companies are to move to a low carbon economy, found that none of the world’s largest 20 listed carriers have CO₂ targets that will meet the Paris Agreement’s goal of keeping global temperature rises below two degree Celsius. The authors of the report, who are backed by the owners and managers of $13trn (£9.9trn) of assets, including the Church of England Pensions Board, also called for more transparency as it is unclear how these airlines plan to reduce their flight emissions beyond 2025.
Airlines currently account for 2% of global CO₂ emissions, but the study dis- covered that they appear to be only doing the basics when it comes to protect-
Green bond market to break $200bn barrier in 2019 – SEB
The fight against climate change is to reach new heights this year, one market watcher believes. A record amount could be raised through green bonds in 2019, according to Nordic bank SEB, which believes that between $210bn (£158.6bn) and $240bn (£181bn) could be generated to fund projects aimed at benefiting the environment. This beats the record $183bn (£138.3bn) that was raised through the asset class in 2018, which was 6% higher than the $173bn (£130.7bn) invested in 2017. If issuance reaches the top end of SEB’s forecasts, then the amount of capital raised for green projects will increase by 31% during 2019. SEB’s bullishness is fuelled by a strong January, where $17.2bn (£13bn) was raised – a 17% improvement on the opening month of 2018. A further $7.8bn (£5.9bn) was collected in the first week of February. This has put to bed any fears that demand for such products was cooling after issuance in December was 20% lower than in the same month of 2017. The US (£5.3bn), France (£2.7bn) and Canada (£1.8bn) were the leading issuers. The UK did not make the top 15.
Cash-flow hungry institutions boost wind and solar power interests
ing the environment. Many airlines have adopted industry targets to reduce emissions, but this approach relies on offsetting to limit their carbon footprints.
The study looked at fuel efficiency per passenger for each kilometre flown, which put ANA, Japan Airlines, Korean Air and Singapore Airlines at the top of the highest emitters list.
The lowest emitter is UK budget carrier Easyjet, which is also the only airline that has a two degree Celsius target beyond next year. Since the research was published Wizz Air has provided more information on its climate performance, which could put it on the low emitter list once the information has been verified by the authors of the research. TPI co-chair Faith Ward said: “Investors have a clear message to the aviation sector: When it comes to carbon performance they must be in it for the long haul. That means setting stretching emissions reduction targets to 2030 and beyond, and ending a reliance on offsetting.” USS’ head of responsible investment, David Russell, welcomes the research. “The airline sector is one where emissions – and therefore exposure to climate policy risk – are predicted to grow. As a result, the sector has to be able to explain to its investors how it will manage the shift to a lower carbon future. The analysis shows that whilst some in the sector are treating this issue strate- gically, others have some way to go.”
Pension schemes have almost doubled their average exposure to renewable energy in the past two years, a survey has found. The typical institutional allocation to cleaner energy sources stands at 3.6%, up from 2% in 2016, according to Aquila Capital.
The asset owners questioned by the alternative asset manager said they expect to continue investing in wind and solar assets in the next two years.
This could be a sign that the world transitioning to a low carbon economy is becoming a major investment theme for those with long-term horizons. Its popularity is not just driven by ethical concerns. The majority of renewable energy investors (55%) are attracted by the sector’s long-term stable cash-flows, while 35% are drawn to geographic diversification and a low correlation to other assets. Inflation hedging was named by a third of respondents with fighting global warming lagged behind at 30%. Regulation was named as the greatest influence on the sector’s growth by 63% of institutional investors.
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