As the aviation sector looks to do its bit in the transition to a net zero future, alternative aviation fuels are touted to be a key part of the puzzle.

Urgent action is needed to tackle aviation emissions. They currently account for 2.5 per cent of global CO2 emissions – and could reach nearly 25 per cent in the coming decades.

Alternative fuels, therefore offer an attractive prospect. They are ‘drop-in’ ready, which means they can be used in existing plane infrastructure.

But how ‘sustainable’ are these fuels really?

This is a question that the investment sector needs to be asking itself.

As long-term stewards of capital, their actions will ultimately help define aviation’s pathway to net zero. They hold huge weight, and should be scrutinising the claims of the sector – including airlines, aerospace companies, and oil and gas producers – are making about the fuels they are pursuing. And while, climate and carbon emissions are important factors, this is not only a climate challenge.

Investors should also be considering vital aspects such as these fuels impacts on wider nature, the impacts this transition could have on the sector’s workforce, and the possible wider impacts on communities.

In so doing, investors should prioritise transparency, accountability and a meaningful transition away from false solutions, to ones that will yield genuinely positive outcomes for people and the planet, as well as profit.

What do we mean by alternative aviation fuels?

Alternative aviation fuels covers a broad bucket of potential solutions: crop-based biofuels, waste fuels and e-fuels (those generated using renewable energy, hydrogen and captured carbon). These fuels have varying impacts when it comes to their climate impact, as well as wider impacts on environment, the just transition and society.

This poses a challenge to investors. How to scrutinise their investee companies, and how to identify and drive support for the highest integrity options.

Our newly published Investor Guide unpacks this challenge across three core themes: environment, just transition and social.

It presents a comprehensive list of engagement questions that investors can use to support a more holistic transition for aviation fuels. Learn more in the complete report here.

Environment: A land use challenge

The biggest environmental challenge of the aviation fuels transition is that of land.

We have a finite amount of it. And it is being used for other critical purposes: such as growing our food.

For example, powering half of the all EU flights with e-fuels would require eight million hectares of land. This is mostly due to the land needed for the renewable energy used in the process.

But for crop-based fuels, the demand for land is even higher. In fact, it would need some 33 million hectares of land, or an area the size of Finland. This demand – particularly for crop-based fuels – could lead to the conversion of potential virgin ecosystems to crop growing — which releases vast amounts of stored carbon from the soil into the atmosphere.

It also has the potential to lead to ecosystem degradation, habitat loss, soil degradation and more.

In fact, given the potential climate and environmental impacts of crop-based fuels, they are not seen as acceptable under either the UK’s SAF Mandate or the EU’s ReFuelEU regulation. As such they are unlikely to be considered a sustainable investment under legal regimes.

Investors can ask questions that better scrutinise sustainability and environmental claims, to ensure transparency and meaningful transition plans. For example, “biofuels” in corporate transition plans could represent crop based fuels, waste based fuels, and the huge spectrum of environmental issues they cover. For e-fuels, the use of captured carbon is also an environmental consideration. Asking questions specific to land use, fuel feedstock production and operational processes can reveal the true environmental impact and nature considerations of such alternative fuels.

Just Transition: An opportunity to build a future workforce

As with all industries with a complex decarbonisation pathway, the net-zero transition will involve significant changes and challenges for workers.

It is not a given that today’s workforce would easily transition into roles as the production of these fuels changes, and new technologies and solutions are used.

It is critical for companies to factor this in early – ensuring their workforce is not left behind and communities don’t become the victim of unknown impacts.

Key to this will be engaging with workers and unions early, and in a way that prioritses dialogue.

Meanwhile companies should invest in reskilling workers and providing strong social protection for workforces. This could involve assessing where existing skills could be utilised, mapping reskilling requirements and pathways from a logistical and financial perspective, and identifying gaps where new skills are particularly required for new technologies.

Investors should challenge investee companies on how they are considering workers and communities and factoring in just transition. They should be checking if companies have just transition plans in place and if they engage with national and regional policies that relate to workforce protection. They should also scrutinise the company’s commitment to retraining and retaining their workforce as they decarbonise their operations.

Social: Balancing fuel production, food security & energy access

On top of the implications for workers, investors should also examine the wider social impacts of the fuel transition. For example, crop-based fuels could be in direct competition to crops for food.

Meanwhile, e-fuels demand a huge amount of renewable energy production. This could be in direct competition with other uses for such energy, including decarbonising the grid or our transport systems.

When you consider that 80 per cent of the world’s population have never set foot on a plane, and that one per cent of the population are responsible for 50 per cent of the sector’s emissions, it is vital that solutions to aviation’s climate challenge don’t come at the expense of ordinary people’s pressing needs.

In Europe specifically, it is vital to ensure global equity. Not only are we more likely to be flyers than individuals in lower income countries – where climate impacts are already being felt profoundly – but we import a lot of the feedstocks vital in the production of alternative fuels.

We need to ensure we are not fuelling exploitation and driving potentially unrecognised social impacts affecting the nation’s natural resources.

To centre social factors in engagements, investors can put a lens on companies’ operations and supply chains. This would include the traceability of feedstocks and social protections they have in place around food security or energy access.

How investors can support a just, equitable transition for aviation

Considering the task ahead for aviation, it is vital that investors are asking the right questions of their investee companies across the aviation and oil and gas sectors, to hold companies accountable and for investors to ensure their investments present minimal risk and maximum returns.

The above themes of environmental, just transition and social factors should be embedded, prioritised and effectively met for this to take place, and to ensure we prevent the worst effects of climate change.

There is a huge opportunity for companies and investors in decarbonising here and now, supporting solutions that present regenerative and more sustainable supply chains, considers the environmental implications and long term climate impacts, and supports existing and emerging workers. This will ensure long term economic stability for people, the planet, while yielding profits for companies and an investor’s member beneficiaries.

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