HI Uplift: ESG – box ticker or business driver

news

by Mike Stones

15 July 2024

ESG in focus. L to R: Clark McGinn, Uplifting Advice, Steve Robertson, LCI Analytics, Michelle Davies, EY Law, Pauline Gasquet, RIVE Investment and Gerard Deterne, Pteron Valuations.

ESG: three letters, one cumbersome term standing for environmental, social and governance. But what does it mean? And is it important for the global helicopter industry, as it resets to the new normal of rising demand and limited lift – at least in offshore markets?

To find out, let’s eavesdrop on the session devoted to the topic at last month’s Helicopter Investor London 2024 conference. But first, a definition for the acronym weary. Big Blue, tech giant IBM describes the term as a set of standards used to measure an organisation’s environmental and social impact. “It’s typically used in the context of investing, although it also applies to customers, suppliers, employees and the general public,” it points out helpfully.

But what’s that got to do with helicopters? Not much, according to nearly a third of audience polled near the beginning of our ESG session. Asked how many of the audience were actively engaged in driving sustainability in their business, 29% replied no and 71% said yes. During the rest of the session, speakers highlighted why ESG needs to be at the centre of helicopter investment strategies and organisations.

‘A bit outdated’

First, a disclaimer from Michelle Davies, global head of Sustainability for EY Law, who asked the audience question. In preference to ESG, which “is a bit outdated”, Davies chooses sustainability. And for most of her firm’s clients, legislative compliance is the overriding objective, she admits. “Clients will say the same thing,” reports Davies. “I don’t want to be an A-star student. I don’t need to be best-in-class. Just tell me what we have to do not to get into trouble.”

But sustainability is increasingly becoming about far more than simply complying with regulations. “It’s not just about the regulations – although you have to do what they say,” explained Davies. “It’s about what your stakeholders require.” And failing to deliver can have powerful consequences.

“If our institutional investors, or your bank, or your insurance company, or your customers require you to do something and you don’t do it, then you will either cease to engage with them or they will cease to engage witth you. Or they will continue, but on different terms. And then that starts to hit the bottom line.”

‘Drive asset values’

Appraiser Gerard Deterne, CEO and founder of Pteron Valuations agreed ESG is fast becoming more important. “It’s not just a box-ticking exercise,” he said. “From a business point of view, I see the implementation of ESG considerations will drive business value. And as a consequence, they will drive tangible asset values.” It is important the industry exchanges views on the topic, he added.

Qualified support for ESG came from Steve Robertson, MD, LCI Analytics. He believed there is too much focus on the E of ESG, which could lead to polarising debates about climate change. But there is no doubting the significance of the topic for helicopter companies, he added. “ESG is real and it’s important,” he told the audience. “If you want to be at the party … to work with blue chip companies, you are going to have to get to grips with ESG.”

Pauline Gasquet, new head of Sustainability at RIVE Investment described ESG or sustainability as a “value creation factor”. Her mission at RIVE was to drive ESG values and performance across the whole company, she added.

There is a tendency to summarise ESG as referring to environmentally friendly, lower carbon emissions, said the head of Sustainability at RIVE. While fuel efficiency and sustainable aviation fuel (SAF) are important, it’s also important to consider the S (social) factors and G (governance), said Gasquet. Social factors refer to social issues, human resources and human capital, including the impact of business on societies.

‘Not forget the S and the G’

Governance factors cover processes and transparency in conducting business. “This is something which is going to become more and more important,” she said. “So, when we think about ESG, as this community, let’s not forget the S and the G. These are important.”

For Davies at EY Law, “impact means everything”. It goes beyond the simple letters ESG (or sustainability) to encompass much more. At the very least, it means business should not have a negative impact. But increasingly, key stakeholders, customers, suppliers, communities, in which companies operate, and society at large want to see businesses having a positive impact.

“We are moving into a world which is going to say, in addition to not having a negative impact: ‘Show us the positive impact that your business is having,’” said Davies. Aviation, and particularly the helicopter sector is “in the line of fire” from those who want to scrutinise performance and there was concern over the authenticity of carbon credits, she added. The next five years would show the importance of adopting (and being seen to adopt) high sustainability standards.

Robertson at LCI Analytics said: “ESG is a great opportunity to tell a positive story about the industry.” Encouraging greater diversity (the S part of ESG) was a good opportunity to promote aviation, he added. “Maybe part of the reason why we don’t see much diversity in this industry is because it has an image problem. This is a great opportunity to articulate to the wider world about why aviation is exciting and why people should be part of this industry. Here’s all the impressive stuff we are doing.”

Millions of kilos of CO2

For example, for crew transfers 120 nautical miles offshore, switching in future to more fuel-efficient helicopters, such as super-mediums, compared with old-model heavies could lead to 30% saving in CO2 emissions. That could mean saving millions of kilos of CO2 over the 25-year life of an oilfield.

Speakers highlighted the importance of data collection to measure improvements in sustainability performance. RIVE Investment is estimating helicopter emissions based on helicopter engines and mission profiles. It is also working with lessors to incentivise operators to use SAF.

So, box ticker or business driver? For the panel, if not the entire conference audience, ESG is not just a business imperative but also a golden opportunity to lift aviation’s sustainability standards and to demonstrate that achievement to a range of stakeholders. Not least staff, investors, clients, suppliers and society in general.

Session moderator Clark McGinn, principal of consultancy Uplifting Advice summarised the session like this: “We know there is a lot to do [to make significant and lasting progress on ESG and sustainability standards]. It’s up to all of us to move that forward. The advice to act before you are acted upon is important for us. I think what we have done through helicopter offshore collaboration is a guideline for us.”

Meanwhile, our Helicopter Investor London 2024 conference was staged last month at the Landmark Hotel London. More conference details are available here.

If you enjoy our newsletters please encourage colleagues to sign up here. (It’s quick and easy to unsubscribe). Thanks.

HI Uplift Dashboard: Helicopters for sale

Multi engine