Aviation data and advisory consultancy IBA is providing financial institutions and aviation market participants with the data and tools needed to help the industry reach net zero.
The Surrey-based organisation is the first aviation-focused external reviewer aligned with Guidelines for Green, Social, Sustainability and Sustainability-Linked Bonds External Reviews published by the International Capital Market Association (ICMA).
The designation gives IBA the responsibility of affirming that market participants – airlines as well as aircraft leasing companies and private owners – live up to their sustainability declarations.
“Investors use our information to assess the saving in CO2 emissions they will get by investing in today’s technology, rather than where it compares to the previous technology,” IBA President Phil Seymour tells ESG Insight. “Some investors are not just asking ‘will it burn less fuel than the latest model’ – they’re actually asking what the CO2 saving would be if a particular aircraft replaced another specific aircraft.”
Through its InsightIQ platform of real-time data, IBA offers transparency into more than 34,000 aircraft. Based on hundreds of data points, including aircraft design, wing shape and cabin seating plans, the dashboard-based service also comprises IBA’s Carbon Emissions Calculator (CEC), the first-of-its kind carbon accounting solution for the industry.
Airlines, plane manufacturers and airports are under intense pressure to lower their carbon footprints. The sector is a top-ten emitter and held accountable for just over 2 per cent of man-made greenhouse gas emissions. At its rate of growth before the Covid-19 pandemic, the Climate Action Network (CAN) and International Coalition for Sustainable Aviation (ICSA) estimated that by 2050 airlines could be responsible for a quarter of the remaining carbon budget – the total amount of CO2 that can be burned before the critical 1.5 degrees level of global warming is breached.
The pandemic, which grounded tens of thousands of aircraft and which continues to subdue flights globally, may yet temper those calculations. But the industry is still being scrutinised by investors.
Investors had been getting good returns on their aviation holdings, said Seymour, but increasingly they are “concerned that they’re going to be seen as investing in a world that burns hydrocarbons”.
The CEC is built on IBA’s proprietary fuel-burn assessment formula, which in turn is based on a wealth of information contained in the latest specifications from aircraft and engine manufacturers and engineers. That’s combined with publicly accessible real-world flight trackers such as FlightRadar 24 and FlightAware, enabling IBA to provide data down to the individual aircraft level.
Some comes from data disclosed by airlines and leasing companies, but both sectors use the platform either to compare its readings with their own in-house calculations, to check on competitors’ performances or simply to use the insights in their own sustainability disclosures.
IBA audits its own data pools by scraping information from participants’ publications and financial reports.
“We’ve correlated our data against that, and we’re within 0.5% in terms of our data compared to theirs, which is good to know,” Seymour says.
Seymour says investors aren’t looking to get the most granular data on aircraft performance (“they’re not after 0.0 per cent accuracy, they just want to be able to compare apples with apples”). Nevertheless, IBA is striving to get as full a picture as possible. To help give the most accurate fuel-burn calculation it also takes into account factors including airframe aerodynamics, the use of winglets (the small upturned tips at the end of some planes’ wings, which help improve fuel economy), as well as the amount of time planes have been in the air or parked.
Crucially the CEC module enables clients to compare each flight or asset according to different variables, including the type of SAF they use. This is important for airlines’ carbon forecasts and also for investors wanting to compare one potential aviation investment with another, including future models.
Calculations come with their own challenges, however. While fuel efficiency is generally presented as a measurement of fuel burnt per mile flown, Seymour says it’s a gauge that can be misleading.
“There’s a belief in the industry that it is using the wrong benchmark,” he says. “If you’re measuring something based on distance and numbers of passengers, the larger the aircraft and the further it flies the lower its carbon calculation will be.”
That puts smaller, and sometimes more efficient, aircraft at a disadvantage.
For example, using IBA’s carbon emissions formula, a widebody long-haul Boeing 777 can receive a better greenhouse gas score than a small Embraer regional jet flying a domestic UK route, even though the intercontinental flight has produced far more CO2. Additionally, without airlines offering data, it’s difficult to know how many seats have been filled on each flight. Therefore, IBA assumes that all planes are full, which Seymour concedes can skew results too.
Further, airlines will forecast their future carbon footprints according the number of hours flown but report them in terms of passengers carried.
For that reason, IBA offers aircraft emissions results based also on the number of hours flown as well as absolute CO2 production figures, a measure that many clients are requesting.
The aviation industry is keen to tell the story that it’s doing all it can to bring down its carbon footprint. But Seymour said executives feel they will be condemned whether they act or not.
For instance, SAF is a double-edged sword because some blends – particularly those derived from palm oil – can have poor ESG impacts of their own. And while new engine technology is likely to reduce fuel burn to a fraction of what it used to be, investors must pay now only to get those benefits in the indeterminate future.
Seymour says more data will be needed to fully satisfy client inquiries and to put an end to the industry’s sustainability efforts being “seen as greenwashing”.
IBA is therefore looking to include supplementary data points such as take-off weights and accurate measurements of passengers carried per flight and what percentage flew business class. To that end, IBA is in talks with online travel agents such as Expedia and Google Flights. In this way IBA hopes to be able to offer accurate scores down to the level of individual passengers.
The organisation is also looking into how it can reflect the social good that international travel can bring, providing transparency into the S part of the industry’s ESG equation.
“We’ve found that a lot of the funds that we are dealing with, are starting to get a few problems, as if investors are saying, ‘aviation’s never going to be green – it’s just different shades of brown,” Seymour says.
“But airlines are very much aligned with net zero because actually they want to burn as little fuel as possible and produce as little CO2 as possible. The thing is, how rapidly will that alignment go to zero?”
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