Pegasus Guidelines: A Useful Tool for NZBA Signatories in Aviation Decarbonization

The Pegasus Guidelines were developed by the Rocky Mountain Institute (RMI) together with the Climate Aligned Finance (CAF) banking group to provide a useful framework for financial institutions, particularly those aligned with the Net-Zero Banking Alliance (NZBA), to accurately and independently measure and disclose the emissions intensity and climate alignment of their aviation lending portfolios when compared to a 1.5°C scenario to reach net-zero emissions by 2050.

The guidelines emphasize the importance of using reliable data. PACE is proud to have qualified as a Pegasus third-party data provider, supporting its customers to ensure transparency and consistency in their NZBA reporting.

NZBA Key Milestones in 2024 and 2025

The Net-Zero Banking Alliance (NZBA) has set key milestones for its members to achieve by 2025, emphasizing the inclusion of capital markets emissions in their climate targets. From April 22, 2024, all new targets set or existing targets reviewed must align with Version 2 of these NZBA Guidelines.

By November 1, 2025, members are required to review their targets to account for emissions from underwriting and arranging new debt and equity instruments, where significant and where data and methodologies allow. Following this inclusion, banks must disclose a high-level transition plan within a year outlining actions and milestones necessary to meet their science-based targets aligned with limiting global warming to 1.5°C.

Comprehensive Reporting Data Points for NZBA with PACE

With PACE, financial institutions can enhance their reporting capabilities by accessing a full portfolio report that includes CO2e tonnes measured in both Tank to Wake and Well to Wake formats.

This comprehensive approach allows banks to capture the complete lifecycle emissions associated with aviation fuel consumption, providing a more detailed understanding of their environmental impact. In addition to CO2e measurements, PACE offers a full suite of intensity analysis metrics, which includes:

• Available Tonne Kilometers (ATK)
• Available Seat Kilometers (ASK)
• Available Cargo Tonne Kilometers (ACTK)
• Revenue Tonne Kilometers (RTK)
• Revenue Passenger Kilometers (RPK)
• Revenue Cargo Tonne Kilometers (RCTK)

These metrics enable banks to assess emissions intensity more accurately, aligning their lending practices with climate goals and enhancing their overall sustainability efforts.

Pegasus Guidelines Framework for NZBA

Developed collaboratively by leading banks including BNP Paribas, Citi and Standard Chartered, the Pegasus Guidelines represent the first voluntary climate-aligned finance framework tailored specifically for the aviation sector. The guidelines play a crucial role in NZBA reporting by providing:

• Standardised Assessment: Banks can perform a consistent evaluation of their aviation portfolios, calculating emissions intensity and climate alignment in a transparent manner.
• Access to High-Quality Data: The guidelines emphasise the importance of using accurate and credible data sources, ensuring that institutions can reliably measure their emissions and make informed decisions. This is vital for establishing a trustworthy baseline from which to track progress. PACE is a Pegasus-Qualified Data Provider.
• Annual Disclosure: Signatories can disclose their emissions intensity and alignment results annually, fostering transparency while maintaining client confidentiality.

Pegasus Guidelines and the Calculation Process

To utilise Pegasus Guidelines banks must follow a structured process:

1. Data Collection: Accurate data on emissions is essential. This begins with calculating Total GHG Emissions using the formula of carbon dioxide plus equivalents measured from the fuel well to the aircraft’s wake – this is presented as CO2e WTW. This total calculation is then analysed through the intensity of Revenue Tonne Kilometers – RTK – which includes passenger, belly freight and dedicated cargo kilometers flown while considering the load factor of each flight.
2. Emission Factors: Utilising standardised emission factors helps convert operational data into GHG emissions, ensuring comparability across different portfolios.
3. Portfolio Intensity Calculation: The formula for calculating Portfolio Intensity is:
   
   
4. Benchmarking: The calculated Portfolio Intensity is compared against benchmarks aligned with the MPP PRU scenario, enabling banks to assess their performance relative to climate targets.

Importance of Accurate Data

Accurate data is the backbone of effective emissions measurement and reporting, particularly for calculating the Portfolio Alignment Score (PAS). The Pegasus Guidelines emphasize the necessity of using reliable and verified data sources, which is crucial for:

• Credibility: High-quality data enhances the credibility of emissions reporting, making it easier for stakeholders to trust the results.
• Informed Decision-Making: Accurate emissions data allows banks to make informed decisions regarding their lending practices and identify opportunities for improvement in portfolio alignment. A precise PAS score, which reflects how well a portfolio aligns with climate targets, relies on this data.
  
  
• Progress Tracking: Consistent and precise data collection enables institutions to track their progress over time, ensuring they remain on course to meet their climate commitments. This is especially important for benchmarking against the Mission Possible Partnership Prudent (MPP PRU) scenario, which is aligned with limiting global warming to 1.5°C and achieving net-zero emissions by 2050.

By prioritising accurate data, financial institutions can strengthen their emissions reporting, enhance their PAS scores, and contribute effectively to the decarbonisation of the aviation sector.

Conclusion

The Pegasus Guidelines are a useful resource for NZBA signatories, providing a comprehensive framework for measuring and disclosing aviation portfolio emissions. By adopting these guidelines, financial institutions can play a pivotal role in supporting the decarbonisation of the aviation sector, aligning their operations with global climate goals and fostering a sustainable future for all stakeholders involved. Accurate data utilisation is not just a technical requirement; it is a foundational element that enhances the effectiveness of these guidelines and the integrity of the financial institutions’ climate commitments.