Charting the Evolution of
ESG in Aviation
As Investors and Financial institutions increasingly choose to invest in sectors that are demonstrating positive impacts on the environment, we trace the inter-relationship between ESG and Aviation over time.

Timeline of Key Moments for ESG in Aviation
- 1750The Industrial Revolution
- 1903First powered flight
- 1909Good for Society
- 1944ICAO founded
- 1953Term CSR coined
- 1969Icons Take Flight
- 1992UN Earth Summit
- 1994Triple Bottom Line
- 1997UN Kyoto Protocol
- 2002"Greenwashing"
- 2004Term ESG coined
- 2005Blue Ocean
- 2006Stern Review
- 2006Corporate Citizenship
- 2011Shared Value
- 2012EU ETS
- 2015Paris Agreement
- 2016CORSIA
- 2019PACE begins
- 2020Waypoint 2050
- Oct 2021COP 26
- Oct 2021Fly Net Zero
- March 2022SEC rule changes
- April 2022TCFD Mandatory
- April 2022Representative Groups
- Oct 2022ICAO - Net Zero 2050
- Oct 2022ALI Sustainability
- 2023EU Taxonomy
- 2023Fit for 55
- 2023ISSB standards
- 2024CSRD
The Industrial Revolution
1750 – 1840
The Industrial Revolution is a period in history when society evolves from an agrarian and handicraft economy to one dominated by industry and machine manufacturing. These technological changes introduce novel ways of working and living and fundamentally transform society (Toynbee 1883). This transformation however begins the release of large amounts of carbon dioxide and other greenhouse gases into the atmosphere, beginning a process of change in the earth’s climate through global warming. Later the Paris Agreement of 2015 will set out a global framework to limit global warming to well below 2°C compared to pre industrial times, and pursue efforts to limit it to 1.5°C.
First Powered Flight
The Wright Brothers
Wilbur and Orville Wright spend four years of research and development to create the first successful powered airplane, the 1903 Wright Flyer. It flies for the first time at Kitty Hawk, North Carolina, on December 17, 1903, with Orville at the controls. The aircraft is a Canard biplane with one 12-horsepower Wright horizontal four-cylinder engine driving two pusher propellers via a sprocket-and-chain transmission system. It is non-wheeled, with linear skids acting as landing gear, and is made of a natural fabric finish with no sealant or paint of any kind. (National Air and Space Museum)
The distance of this first flight is less than the wingspan of a Boeing 747.
Good for society
“What is good for business is good for society”
While the phrase ESG – Environmental Social Governance – will not be coined until 2004, advocacy for the S in ESG, namely social value begins much sooner. In 1909 Joseph Schumpeter champions that what is good for business is good for society, challenging much of the capitalist approach to financial profit making alone. Indeed he later predicts that values held by ‘intellectuals’ will lead to the collapse of the classic form of capitalism, due to their rejection of the conditions under which it typically operates (Schumpeter 1942).
ICAO founded
International Civil Aviation Organization
ICAO is an agency of the United Nations responsible for international air navigation. Headquartered in Montreal, Canada, it is responsible for the development of safe growth.
ICAO is funded and directed by 193 national governments to support their diplomacy and cooperation in air transport as signatory states to the Chicago Convention (1944). It researches new air transport policy and standardizes innovations as directed and endorsed by governments through the ICAO Assembly, or by the ICAO Council which the assembly elects.
Term CSR coined
CSR – Corporate Social Responsibility
The idea of corporate social responsibility (CSR) is advocated by Howard Bowen in 1953 in one of the first comprehensive discussions of business ethics and social responsibility. It is not without its critics, as it is arguable that a corporation cannot have responsibility as this is a human condition (Friedman 1970). CSR is also criticised as lacking a consistent framework for its measurement, though this lack does not slow its development as a huge priority for business leaders nor contribute to a link being made between CSR and competitive strategy (Porter and Kramer 2006).
Icons Take Flight
A seminal year as Jumbo, Concorde and Apollo 11 take flight
Following customer demand for more capacity to reduce average cost per seat, the first flight of a Boeing 747 takes place on February 9, 1969. The aircraft enters service with Pan Am early the following year and the iconic nickname of “jumbo jet” is born. An equally well known (if considerably less flown) icon, the Concorde, is meanwhile in progress. Its first flight takes off from Toulouse in March 1969, though it will be 1976 before the first passenger scheduled flight takes place. This supersonic aircraft is capable of travelling at twice the speed of sound, an almost unthinkable achievement at the time and one which is about to be outshone by perhaps the greatest icon of them all, Apollo 11, which takes humankind to the Moon for the very first time.
UN Earth Summit
Sustainable development an attainable goal for all
The United Nations Conference on Environment and Development (UNCED), also known as the ‘Earth Summit’, is held in Rio de Janeiro. This global conference brings together political leaders, diplomats, scientists, representatives of the media and non-governmental organizations (NGOs) from 179 countries for a massive effort to focus on the impact of human socio-economic activities on the environment. (United Nations)
The UN IPCC (International Panel on Climate Change) presents the first of its Climate Change Assessment Reports in which the reality of global heating is made clear. “We are certain of the following: emissions resulting from human activities are substantially increasing the atmospheric concentrations of the greenhouse gases. These increases will result on average in an additional warming of the Earth’s surface.”
Triple Bottom Line
More than one way for a business to measure its success
The concept of “triple bottom line” is put forward, where measurement of a company’s performance consists not only of financial success but also social and environmental factors (Elkington 1994). Critics of conventional financial measurement argue that it is one-dimensional, while measurement of performance in societal terms may only be an aggregation of individual valuations (Kenter et al. 2015). Nevertheless the concept offers a clearer interpretation of how CSR plays a role in corporate strategy. For many firms transitioning to triple bottom line will be very challenging – having learned to derive economic competitive advantage from their own resources and capabilities they are now faced with deriving it from both environmental and social outcomes (Tate and Bals 2018).
These challenges mean for many that Triple Bottom Line is way ahead of its time.
UN Kyoto Protocol
A framework to drive Climate Change
By 1995, the second IPCC report has started to point the finger firmly at human-caused emissions for rising global temperatures: “Global mean surface temperature has increased by between about 0.3 and 0.6C since the late 19th century. The balance of evidence suggests a discernible human influence on global climate.” The Kyoto Protocol is adopted on 11 December, 1997, though owing to a complex ratification process, it will enter into force on 16 February 2005. The protocol operationalises the United Nations Framework Convention on Climate Change by committing industrialised countries and economies in transition to limit and reduce greenhouse gases (GHG) emissions in accordance with agreed individual targets. The Convention itself only asks those countries to adopt policies and measures on mitigation and to report periodically. (United Nations)
“Greenwashing”
One word that will accelerate the process of change
The term “greenwashing” is coined in 1986 by Jay Westerveld in the context of a hotel sign about reusing towels for environmental reasons, when he believes the motive is more about the hotel saving money. It is included on our ESG timeline in 2002, as this is when greenwashing is called out as a strategy to mask a series of scandals in corporate America that has shaken the market’s trust (Handy 2002). A form of advertising or marketing spin, greenwashing entails “green PR” or “green marketing” to deceptively persuade the public that an organization’s products, aims and policies are environmentally friendly. Companies that intentionally take up greenwashing communication strategies often do so in order to distance themselves from their own environmental lapses or those of their suppliers.
Term ESG coined
Corporate Social Responsibility steps up a level
Though the exact moment the phrase ESG is uttered is uncertain, what is certain is that under the auspices of the UN Global Compact, the UN Secretary General Kofi Annan commissions a report titled “Who Cares Wins”. Senior executives of signatories to the Compact, largely from financial institutions, are invited to join in the initiative which makes recommendations for change that these institutions will commit to. Environmental Social Governance, while still being open to interpretation, is considered to be more measurable than CSR, addressing a fundamental criticism of CSR in corporate strategy. Of the three pillars it is the E in ESG which is most measurable, beginning a process of change that will see environmental performance become a priority in boardrooms globally.
Blue Ocean
Building competitive strategies in new markets
Following years of the concepts of CSR being considered to be idealistic, the increased measurability of ESG is seeing the tide starting to turn. New firms are forming alongside existing firms that are changing, with the goal to pursue profits in new markets created by the increased possibilities in ESG related activities. This opportunity for a firm to build competitive strategy by pursuing new markets is referred to as “blue ocean strategy”. (Kim and Mauborgne 2005).
STERN REVIEW
The economics of Climate Change
The Stern Review was a landmark study that considered the economics of climate change and was published on 30 October 2006. This Review assessed a wide range of evidence on the impacts of climate change and on the economic costs, and used a number of different techniques to assess costs and risks. From all of these perspectives, the evidence gathered by the Review leads to a simple conclusion: the benefits of strong and early action far outweigh the economic costs of not acting.”
Corporate Citizenship
How can a corporation act as a citizen?
This concept, described as corporate citizenship, outlines how companies progress through stages of maturity over time, and ultimately begin adopting a moral standing (Mirvis and Googins 2006). It is noted that this should be integral to a firm’s strategy to develop competitive advantage, recognising the mutual dependence of society and firm. (Porter and Kramer 2006). To compare this theory with CSR, we might change the consideration of success from whether a profit could be made to how that profit would be made (Aakhus and Bzdak 2012).
Shared Value
A Strategy to Enhance Company Competitiveness
Michael Porter published his book “Competitive Strategy” in 1980, and for many, he is considered as as one of the world’s key contributors to management theory and how a firm can achieve competitiveness. In 2011, together with Mark Kramer, they evolve their thinking on the role that CSR plays in corporate strategy to define Shared Value as “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates” (Porter and Kramer 2011 p. 66)
As ever there are criticisms, particularly around measurability, but the concept of shared value, extending to shared values, sees a new way that like-minded firms begin to do business together, locking ESG into a truly external facing mode.
EU ETS
Aviation brought into the European Emissions Trading System
Launched in 2005 and forming a pillar of EU policies on Energy, the EU ETS is recognised as the first large greenhouse gas emissions trading scheme in the world. Aviation enters the EU ETS system for the first time in 2012, joining a mechanism known as “cap and trade”, whereby a limit is placed on the right to emit specified pollutants. Companies operating within the scheme can trade emissions rights with each other.
The EU ETS is based on the idea that creating a price for carbon offers the most cost effective way to achieve the significant GHG cuts needed.
Paris Agreement
A legally binding international treaty on climate change
The Paris Agreement is adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris on 12 December 2015, and enters into force on 4 November 2016. It sets out a goal to limit the increase in global temperatures to “well below 2°C above pre-industrial levels”, with an ambition to aim for 1.5°C above, and is especially notable as the first time a binding agreement brings all nations together to combat climate change. It works on a five-year cycle of increasingly ambitious climate action, with countries submitting their national plans called Nationally Determined Contributions (NDCs). Each successive NDC should show an increasingly degree of ambition.
Also noteworthy this year in the UK is the Financial Stability Board (FSB) creating the Task Force on Climate-Related Disclosures (TCFD), which will come increasingly into play in the near future with mandatory reporting from 2022.
CORSIA
ICAO implements CORSIA
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global offsetting scheme introduced by the International Civil Aviation Organization (ICAO). Airlines and other aircraft operators will offset any growth in CO2 emissions above 2020 levels. This means that net CO2 emissions of aviation will be stabilised, while other emissions reduction measures, such as technology, sustainable aviation fuel, operations and infrastructure options are pursued.
PACE begins
Development of the Platform for Analysing Carbon Emissions begins
Leveraging four decades of innovation experience and aviation finance and risk acumen, development of PACE begins as a joint venture between Fexco and Avocet Risk Management.
PACE supports the aviation industry in managing its biggest ever challenge, providing a carbon emissions accounting and management platform to support aviation stakeholders to reduce carbon emissions and work together to drive change.
Waypoint 2050
50% CO2 reduction target by 2050
The Air Transport Action Group (ATAG) presents ‘Waypoint 2050’ which sets a 50% CO2 reduction target by 2050, compared with 2005. In aviation, waypoints are significant points on a flightpath that pilots use in navigating their direction of travel. They are neither the start nor the end of a journey, but a guide to where the flight needs to go. In developing a long-term goal, the industry has taken this philosophy to acknowledge that 2050 is not a destination, but a marker on a path towards truly zero carbon emissions from air transport. (Aviation Benefits)
COP 26
Glasgow 2021 raises the bar further and GFANZ is launched
COP26 is the United Nations Climate Change Conference summit in November 2021. It sets members’ change ambitions and Nationally Determined Contributions (NDCs). Limiting global warming to 1.5 °C above industrial levels will require halving emissions by 2030 and achieving net-zero emissions by 2050.
At the conference Glasgow Financial Alliance for Net Zero (GFANZ) is launched, a group describing itself as “a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy.” Michael Bloomberg who is UN Special Envoy on Climate Ambition and Solutions, and Mark Carney, former Governor of the Bank of England and current UN Special Envoy for Climate Action and Finance, are Co-Chairs of GFANZ.
Fly Net Zero
IATA to Fly Net Zero by 2050
At the 77th IATA Annual General Meeting in Boston, USA, on 4 October 2021, a resolution is passed by IATA member airlines committing to the achievement of net-zero carbon emissions from their flying operations by 2050. This pledge brings IATA in line with the objectives of the Paris Agreement. The approach is broken down across 4 activities, with % achievement targeted as 65% Sustainable Aviation Fuel (SAF), 13% New technology (electric and hydrogen), 3% Infrastructure and operational efficiencies, and 19% Offsets and carbon capture.
SEC rule changes
Public consultation on mandatory climate change reporting
On March 21st the Securities and Exchange Commission in the USA proposes rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition (SEC 2022). The SEC receives close to 6,000 comments from individuals and companies to the proposed changes.
From an Aviation perspective, this proposal will greatly align the reporting obligations for financiers and lessors based in the USA.
TCFD Mandatory
UK enshrines mandatory climate disclosures for largest companies in law
From April 2022 firms are required to disclose climate-related financial information, ensuring they consider the risks and opportunities they face as a result of climate change. The UK becomes the first G20 country to make it mandatory, a step which follows its landmark Net Zero Strategy and forms part of the government’s commitment to making the UK financial system the greenest in the world.
Representative Groups
Impact on Sustainable Aviation and Climate-Aligned Finance established
Impact members, comprising major Investment Banks and other key aviation stakeholders, set out to chart a common path to sustainable aviation, through jointly understanding and defining KPIs and financing standards. They recognise that aviation financiers have the power to demand more emissions transparency from airlines, and to reward this through transition-finance standards. Impact acknowledges that regulator see finance as a crucial lever for efforts to lower emissions.
In parallel the Aviation Climate-Aligned Finance Working Group (CAF) is an initiative comprising of six global financial institutions. Through a series of workstreams it will set to define metrics for future sustainability linked finance transactions.
ICAO Net Zero 2050
ICAO agrees ambition to align with Paris Carbon Net Zero 2050
In October 2022, the 193 member states of the International Civil Aviation Organization (ICAO) agree to a long-term aspirational goal (LTAG) of net-zero carbon dioxide (CO2) emissions from aviation by 2050, bringing ICAO’s publicly stated ambitions in line with the Paris Agreement. However the fact that the LTAG is “aspirational” is seen by some as a compromise by many, particularly as it is not legally binding. On the positive side it is noted that Aviation was absent from the Paris Agreement in 2015, so commentators are pleased that, albeit 7 years later, it is joining the party.
ALI Sustainability
ALI members sign Sustainability Charter
Aircraft Leasing Ireland (ALI) is proud to unveil its ALI Sustainability Charter at the inaugural Global Aviation Sustainability Day, held in the Convention Centre Dublin on 27 October 2022. The objective is to establish a framework for assessing and disclosing sustainability alignment for leasing portfolio and provide actionable guidance on how to achieve GHG reduction ambitions. This first set of ESG and climate-aligned principles seeks to promote collaboration and ambition amongst the Lessor community.
EU Taxonomy
Reducing emissions in a transition industry
The EU categorises aviation as a ‘Transition’ industry because it is possible to reduce aviation emissions by using sustainable aviation fuel and, eventually, by replacing the current fleet with zero emissions aircraft powered by electricity and green hydrogen. The EU Taxonomy is a leading science-based classification system expected to become the global standard for determining whether an economic activity can be considered environmentally sustainable. Investors globally are looking to the framework to support their approach to sustainable investing and to report on the funds’ impact, regardless of where these funds may be situated. This raises the question of “Sustainable” versus “Transition”, as aircraft powered by standard jet fuels are not categorised as ‘Sustainable’ under the EU Taxonomy.
The final details of the EU Taxonomy on aviation are expected this year.
Fit for 55
At least 55% by 2030
Fit for 55 refers to the EU’s target of reducing net greenhouse gas emissions by at least 55% by 2030. The proposed package aims to bring EU legislation in line with the 2030 goal. The package of proposals aims at providing a coherent and balanced framework for reaching the EU’s climate objectives, which ensures a just and socially fair transition, maintains and strengthens innovation and competitiveness of EU industry (while ensuring a level playing field vis-à-vis third country economic operators), and underpins the EU’s position as leading the way in the global fight against climate change (EU 2023).
ISSB standards
ISSB to publish sustainability financial reporting standards
Though environmental considerations have for many been a factor in investment decisions for quite some time, there has been a gap in reporting and disclosure from an accounting perspective. This requirement can be met by agreeing a framework for sustainability-related disclosures, meeting the needs of multiple stakeholders from environmentalists to the finance sector.
Another significant announcement made at COP 26 in November 2021, the International Sustainability Standards Board (ISSB) is a standard-setting body under the IFRS Foundation. It is expected to announce its inaugural standards by the end of Q2 2023.
CSRD
Corporate Sustainability Reporting Directive
Born from COP26, CSRD aims to improve the flow of money to activities that are sustainable and is a cornerstone of the Green Deal strategy. CSRD increases the number of reporting companies to 49,000, and these companies generate >75% of turnover in the EU. CSRD will increase the scope of information currently required to be reported under the EU’s Non-Financial Reporting Directive (NFRD)(92014/95/EU), and like the NFRD, it will require “double materiality”. Companies must disclose both the risks they face and the negative impacts they cause to climate and society.
For the purposes of the CSRD, a large company is one which meets at least two of the following criteria – a balance sheet of more than €20m, net turnover of more than €40m, an average of more than 250 employees during the financial year. Furthermore Non-EU companies that generate a net turnover of €150m or more in the EU and which have at least one subsidiary or branch in the EU will be required to report.
CSRD reporting will significantly widen the net of Aviation stakeholders who will now be required to report their carbon emissions.
Get in Touch
Email Us