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RMI, in cooperation with leading global banks—BNP Paribas, Citi, Crédit Agricole CIB, Societe Generale, and Standard Chartered—and in consultation with industry, experts, and additional financial institutions has developed a first-of-its-kind framework to enable banks to measure and disclose their aviation lending portfolios’ emissions in a consistent and comprehensive manner.
Today, RMI announced the launch of the Pegasus Guidelines, the first voluntary climate-aligned finance framework for the aviation sector, designed to help banks independently measure and disclose the emissions intensity and/or climate alignment of their aviation lending portfolios compared to a 1.5°C scenario.
The aviation industry contributes 2.5% of global CO2 emissions and is the fastest growing transportation sector. The industry’s success in transitioning to a low-carbon economy will rely on a significant ramp up of sustainable aviation fuels (SAF), as well as further development of hydrogen and battery-electric propulsion and fleet modernization. Financial institutions can play an important role in supporting a range of solutions for the sector through financing the technologies, projects, and companies that can contribute to a low carbon future.
The aviation sector’s ability to decarbonize is dependent on driving progress across a set of key technology levers—some of which they have the ability to influence directly, and some of which will require collaboration across sectors and with policymakers. Underpinning the Pegasus Guidelines is an understanding that financial institutions and airlines must work together to foster solutions that can help the industry decarbonize, together with policymakers, customers, airports, fuel producers, and NGOs. Collaboration with banks, investors, and policymakers will be particularly important to accelerate the production of SAF—the most significant lever of decarbonization for the sector.
The Pegasus Guidelines were designed by RMI and shaped by a core working group of leading financial institutions and draw upon existing standards including those of the Science-Based Targets initiative (SBTi) and the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (ICAO CORSIA). Pro bono legal advice was provided by Watson Farley & Williams throughout development. The framework is designed to be compatible with the Net-Zero Banking Alliance’s guidelines.
In addition to the five banks who supported development of the Guidelines, RMI is pleased to share that an additional two financial institutions will take up this methodology—Caixa Bank and CIC—and two are testing implementation of the methodology and assessing future utilization of the Guidelines—ING and Export Development Bank of Canada.
Grace Cheung, General Manager of Sustainability at Cathay Pacific Airways said, “We welcome the financing community’s efforts to standardize the assessment of the climate impact of their aviation portfolios. At Cathay, we believe collaboration is key to a sustainable future and are committed to our ‘Greener Together’ vision. We hope the Pegasus Guidelines will be widely adopted.”
Similar to frameworks completed for steel (Sustainable Steel Principles), shipping (Poseidon Principles), and aluminum (Sustainable Aluminum Finance Framework), the financial institutions that leverage the Pegasus Guidelines will be equipped to:
- Perform a standardized assessment to calculate their portfolio emissions intensity and alignment with a 1.5°C scenario
- Use a consistent approach to accessing high-quality and credible data
- Disclose their aviation portfolio emissions intensity and/or alignment results annually for transparency, while keeping client information confidential
A launch event will be held by webinar on April 4, 2024. The Pegasus Guidelines are available for free and can be downloaded here.
Tracey McDermott, Steering Group Chair of the Net-Zero Banking Alliance and Group Head, Conduct, Financial Crime and Compliance, Standard Chartered Bank said, “The Net Zero Banking Alliance welcomes the Aviation climate-alignment methodology developed by RMI in collaboration with leading financiers. Members of the Alliance have committed to setting portfolio decarbonisation targets in this important sector. This methodology will assist banks in understanding the net zero pathways for the sector and thus support banks as they seek to measure and transparently disclose their climate alignment and set targets on an independent and individual basis. This will also help to inform discussions between financial institutions and their clients to support their transition to a net zero economy. We look forward to continuing our collaboration with RMI in the coming years as we navigate the transition to net zero.”
Jose Abramovici, Global Head of Asset Finance Group of Crédit Agricole CIB said, “After nearly two years of work, we have designed a framework for lenders to accurately assess and evaluate the emissions intensity of their aviation loan book. This is not a theoretical exercise—this is key to supporting the climate alignment of the industry.”
Yann Sonnallier, Global Head of Aviation Finance at Societe Generale said “Societe Generale is extremely proud to be a founder and initial user of the Pegasus Guidelines, and of all the collective work done since 2022 to establish this reference methodology and framework, consistent with NZBA requirements, and at the benefit of all aviation stakeholders.”
Bertrand Dehouck, Head of Transportation Capital Markets at BNP Paribas said “Over the past two years we have been focused on building a robust methodology to measure the emissions intensity of our aviation business. By knowing what to measure, how to measure it and where to source the necessary data, we are better equipped to understand the core levers of decarbonisation and to support the sector’s low-carbon transition.”
Abhishek Pandey, Global Head of Transportation Finance of Standard Chartered said, “We are delighted to have been part of this important initiative over the last two years, working alongside leading banks and engaging broadly across the industry. The Pegasus Guidelines gives NZBA signatories the tools to navigate the pathways and set targets towards the decarbonization of the aviation industry.”
© 2024 Rocky Mountain Institute. Published with permission. Courtesy of RMI.
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