ACI's ESG guide to help airports attract investments

Airports Council International (ACI) World has released a first of its kind guidance, the environmental, social, and governance (ESG) management best practice, to help airports define and strengthen their ESG reporting framework to position themselves for future growth.

The sudden evaporation of passenger demand amid travel restrictions across the globe has severely impacted all players in the aviation ecosystem, including airport operators. An assessment of airport operators' top line reveals that very few sources of income, such as aircraft parking charges, have been sustained. A large chunk of both aeronautical and passenger-dependent non-aeronautical revenues, such as retail, duty-free shopping, parking, and food and beverages, have nearly been wiped out because of the lack of passenger footfall. The short-term revenue loss, ambiguity about recovery of demand in the post-Covid world, and a tendency to preserve cash has also hurt airport development and renovation plans around the world. The construction of new terminals, runways, and hotel chains has been postponed indefinitely, and development plans have been scaled back.

As airports continue to recover, they are faced with the pre-pandemic challenge of investing in infrastructure to meet future air traffic demand, while also ensuring that they design, construct, and operate in a way that is economically sustainable, inclusive, and socially and environmentally responsible. As such, airports are increasingly adopting an ESG reporting framework to meet their investors' dynamic needs and requests for information on performance and risk mitigation, while also building an inclusive institutional framework that achieves good governance, compliance, and stewardship. Growing areas of ESG interest include public health, climate, diversity, equity, and inclusion.

Given their susceptibility to external shocks, forward-thinking airports are identifying and assessing their preparedness for navigating disruptions. The revenue streams that are not dependent on passengers are a good indicator of an airport's preparedness to handle sudden external shocks. Airport revenues typically come from two sources. Aeronautical sources such as navigation and surveillance to manage air traffic, fuel supply for aircraft, landing–housing–parking charges, ground safety services, and ground handling services for passengers and aircraft are almost entirely passenger dependent. Non-aeronautical sources include both passenger-dependent revenue streams, which are entirely dependent on air travel, such as retail, food and beverage, and duty-free sales at airport terminals, as well as passenger-independent revenue streams, such as rent from commercial spaces and service offerings.

While most airports have focused on improving their non-aeronautical revenue streams, a significant amount of these revenues are still passenger-dependent, including retail, food and beverage, and duty-free sales. A few airports, such as Frankfurt, have diversified their operations to generate considerable revenue from passenger-independent avenues, such as real estate.

Airports now have an opportunity to take the lead and define key airport ESG factors that anticipate and respond to financial market, customer, and community needs. A pre-emptive ESG focus by airports can help standardize factors important to capital projects and operational activities, allowing airports to set, track, and report on internally agreed-upon metrics, versus responding to the growing and varied requests from investors, accounting and/or auditing agencies.

"While many airports already report ESG performance, a strengthened approach on new ESG factors can offer airports access to much needed capital for a quicker recovery and long-term sustainability," said ACI World Director General Luis Felipe de Oliveira. "Rebuilding airports and economies meets ESG investors and airports' shared heightened interest in solutions that act with urgency to combat climate change and social inequities that were amplified during this global pandemic.

"Airports should seek to define and provide the detailed, data-focused ESG disclosures that investors, credit rating agencies, and accounting firms are increasingly requiring. Failing to do so could limit an airport's future investor demand in the capital markets." The ESG management best practice seeks to answer common questions among airports looking to start, improve, or expand their ESG reporting, including: How ESG reporting differs from sustainability reporting, how airports are reporting, why investors are interested, and how airports can adopt the framework. The guidance was developed by the ESG Reporting sub-group of the ACI World Environment Standing Committee.

In addition, innovation in technology and approaches (e.g. by redefining efficiencies in travel) are essential to redefining mobility. Cutting-edge technology, such as autonomous devices and ultralight materials, creates opportunities to transform the mobility system by enabling new business models and mobility services. Innovations abound in aviation, e.g. unmanned aircraft innovations; artificial intelligence; biometrics; robotics; block chain; alternative fuels and electric aircraft. Aviation is therefore ideally positioned to support the innovation discourse and its potential impacts on new mobility.