Sustainable Fitch: Modes of transport have diverse environmental impacts

Sustainable Fitch is out with a new report on the enviromental impact of entites in the transport sector.

Summary:

Transport has a wide range of sustainability impacs. Aviation and shipping contribute to 2.5% and 2.0% of global GHG emissions, respectively, while all three modes impact nature and bring social benefits by facilitating socioeconomic development. This report unpacks sector-relevant drivers of our ESG ratings of transport entities – noting the distribution of rating outcomes and top performers – provides insights from our proprietary data and examines sustainable finance market and regulatory trends shaping the outlook for the sector’s issuers.

Key takeaways:

• Out of the pool of 27 transport entities rated by Sustainable Fitch, 46% received an ESG entity rating of ‘2’, indicating a good/mostly ESG aligned profile, while the remainder received ‘3’, indicating a neutral profile. Aviation and shipping entities tend to receive weaker ratings for the environmental impacts of their business activities, while rail’s environmental impacts are more benign.
• On the social side, the average rating for these entities’ business activities is ‘2’. However, transport entities tend to receive weaker ratings for their social profiles – the component of the entity rating covering policies, targets and disclosures – partly because of the poor ratings they receive on gender metrics, i.e. mostly ‘4s’ or ‘5s’, indicating that they are sub-average/mostly ESG unaligned or poor/entirely ESG unaligned.
• Demand for financing via labelled debt remains buoyant, with 2024 seeing the third-highest annual labelled bond issuance by transport entities, with Asian entities the most active in recent years.
• Transport entities are looking to decarbonise through the adoption of low- and lower-carbon fuels, such as sustainable aviation fuels (SAF), green methanol and green hydrogen, although these efforts face high costs and scalability challenges.