Bizav Faces Grave Risks without Sustainability Efforts

Citi's Ford von Weise warns that lending will be restricted, more regulations will be implemented if bizav doesn't respond sufficiently to climate change.

Ford von Weise, director and global head of aircraft finance at Citi Private Bank, is warning business aviation organizations that they face significant perception, regulatory, financing, and other risks if they don’t build a sustainability plan into their business model. Speaking during Corporate Jet Investor Miami 2021, von Weise said his institution is evaluating how it looks at risk, and a piece of that is climate, environmental, and social risk management.

As he considered climate risks for business aviation, it became clear that perception represents a major stumbling block. While the industry may represent only 0.4 percent of total emissions, environmental groups, particularly in Europe, are vocal about aircraft as polluters and are pushing to ban jets. Von Weise noted that “0.4 percent doesn’t matter to people. We are a huge, monstrous target. Why? Because the individual carbon footprint of every one of our clients is outsized. It's huge. Why else? Because we are fat cats, supposedly.”

Even if collectively business aviation represents a tiny percentage of emissions, “Facts don’t matter. Perception is reality,” he said.

Other concerns for business aviation involve regulatory environments and stakeholders. “Unmitigated, the regulatory risk is through the roof," von Weise said. "Stakeholder risk is through the roof.” In the regulatory environment, governments will pass laws to make things happen, regardless of the facts. Stakeholder risks could involve shareholders complaining about the use of business jets, employees complaining about their use, or external pressures such as flight-shaming. They could also involve clients who won’t buy products from companies that do not demonstrate sustainability.

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Right now, the industry has quite a perception problem.

Also, in the next 10 years, banks will be required to evaluate every corporate borrower on its sustainability goals. “If you do not have a sustainability plan, you will not be able to borrow money from major banks,” von Weise said. “This is coming down from the regulators, from our shareholders, and lots of equity funds as well.”

As for regulations, he pointed to emissions trading schemes, taxes on aircraft operations, and anticipated taxes on fuel. Unmitigated, the cost of operations can skyrocket, he said.

While von Weise added that efforts such as carbon offsets “are fine,” he stressed that this is “window dressing. It's not the permanent solution because there are issues with how much you actually offset it. What are you really doing? How much of that is going to actually reduce the risk?”

A more permanent solution is sustainable aviation fuel (SAF), which currently provides an 80 percent lifecycle emissions reduction on the neat portion. “That’s huge,” von Weise said, adding that people may have a narrative that the industry is doing nothing, “except now we have SAF.”

Work has already begun on a second version that can get to carbon negative and deal with contrails, he said. Timing, however, is still uncertain.

Further, companies that have “real ESG”—environmental, social, and governance policies—will fare better with their employees. “It's as much about keeping your company running well,” he said, reiterating that financing sources will become increasingly tied to such plans, and other important entities, such as insurers, will look for such measures.

Using SAF and implementing ESGs will significantly reduce risks, making them easier to manage, von Weise maintained.