Airlines 'are akin to arms dealers'in ethics stakes

Published on 05/02/2008 21:10

AIRLINES have been labelled unethical by one of Britain's biggest investment firms, which plans them to blacklist them alongside arms dealers, pornographers and animal-testing laboratories.

Concern over the millions of tonnes of carbon dioxide produced by commercial aircraft has prompted the Edinburgh-based Standard Life to cease investing in carriers such as British Airways, Ryanair and EasyJet on behalf of tens of thousands of customers of its ethical funds.

The move, which could prompt other fund managers to follow suit, comes amid a fierce debate between green campaigners and the airline industry over the true impact of flying on the environment.

Standard Life Investments, which manages 588.5 million through its Socially Responsible Investment (SRI) range of funds, made the move after almost one-third of its customers who took part in an annual survey called for airline shares to be excluded.

Scottish Widows last night said it already excluded airlines from its own ethical-fund products.

But the decision provoked fury from the airline industry, which highlighted the number of domestic flights between Scotland and London used by investment firms.

Neal Weston, of the British Air Transport Association, said: "The financial services industry itself relies so heavily on aviation to conduct its business, and we are sad to see it turn its back on airlines. The government has confirmed that aviation industry covers its own environmental costs and that it is worth 11 billion to the UK economy."

Dan Welch, a writer for Ethical Consumer magazine, welcomed Standard Life's move and said other big firms might consider similar policies.

But he added that not all airlines were equally to blame.

"There is a debate to be had here," he said. "We prefer schemes which make a distinction between private charter airlines, where emissions per passenger are much higher, and airlines which carry lots of economy-class passengers and are therefore less inefficient."

Aviation accounts for 2 per cent of global carbon emissions and 13 per cent of emissions in the UK. But studies have shown that shipping accounts for more than 5 per cent worldwide, prompting the aviation industry to claim it is being made a scapegoat for climate change.

The Standard Life decision also exposes the often arbitrary nature of ethical boycotts. The change was made after 3,000 of the 39,000 holders of Standard Life ethical funds took part in an annual survey. About 30 per cent of respondents called for airlines to be blacklisted – a figure described by management as "significant".

Julie McDowell, the head of SRI at Standard Life Investments, said: "A panel of senior management and three ordinary investors made the decision based on feedback from the survey.

"We try and reflect ethical concerns of our investors as closely as possible, but we can't always make all the changes that individual investors would like."

She added that suppliers to airlines were not included in the boycott.

Companies which are already avoided by Standard Life's ethical funds include those which manufacture pesticide products, those which test products on animals, intensive farming companies, pornographers, weapons manufacturers, brewers, tobacco producers and those which derive 3 per cent or more of their revenue from gambling.

Ms McDowell added: "For 17 per cent of respondents to our survey, climate change was the top concern, while 53 per cent saw it as one of their top three concerns.

"Interestingly, 91 per cent of investors surveyed would prefer to invest in companies that are doing their best to reduce their climate-change impacts, whereas only 9 per cent of investors felt that it was better to completely avoid investing in companies that are significant contributors to climate change."

Julian Parrot, a partner with the Edinburgh financial advice firm Ethical Futures, said: "Scotland's financial services industry has not exactly blazed a trail when it comes to making ethical decisions, and there is plenty more that could be done, but this is a step in the right direction."

ETHICAL investments in Britain are now worth more than 6 billion, with up to half a million customers choosing to put their money only in stocks and shares of socially responsible companies.

A recent study by Ethical Investment Research Services (Eiris) revealed there are now almost 90 ethical retail funds available to UK investors, like those offered by Standard Life.

Dan Welch, of Ethical Consumer magazine, said most funds boycotted industries rather than specific firms, and that some consumers wanted to avoid unethical firms while others wanted to buy a stake in them to try to influence corporate policies.

He said: "Some funds work on the basis of negative screening – filtering out companies or industries which investors do not want be associated with. Others are more positive, investing in firms they support, for example those involved in renewable energy or which have led the way in changing their behaviour."

He added: "One of the top-rating ethical funds, run by the co-operative CIS, actually invests in BAE, which is obviously controversial. The idea is that by being part of the firm and trying to influence its direction, it can achieve more than by ignoring such companies and just allowing them to carry on what they are doing."

He added that many ethical funds avoided firms involved in alcohol, tobacco or pornography because the ethical market was originally dominated by churches and religious customers.

"There used to be a more moralistic theme than is the case now," he said.

An Eiris spokesman, Mark Robertson, said: "Growing concern over issues such as climate change mean more and more people are thinking about the impact their investments can have. In 2006, there were a record number of ethical options available to UK investors and significant increases in interest in ethical investment."

So is Standard Life right to classify the global aviation industry as an ethical pariah…?

YES

IT is undeniably a breakthrough when large institutions such as Standard Life choose not to back the aviation industry on ethical grounds.

The world's top scientists not only recognise that aviation already accounts for 13 per cent of the UK's contribution to climate change, but that there is no "fix" that can make aviation sustainable in the timeframe in which we need to tackle climate change.

By about 2037, aviation will account for Britain's entire carbon quota. Ethical investment in aviation just does not exist. Institutions are now recognising that any investment in aviation is an investment in the problem rather than the solution.

Airlines receive over 10 billion in tax breaks each year because of tax-free fuel and VAT-free tickets and planes. That's enough to buy over 30 new hospitals, build 2,000 new schools, put at least 450,000 new police on the beat, and pay the tuition fees of over three million students.

Most aviation growth stems from the demand of the wealthiest 5 per cent of the world's population, making 95 per cent of the global population bear the consequences.

Investing in aviation growth means supporting a massive increase in noise pollution for neighbouring communities to airports, it means denying the next generation from living in a world where they can breathe clean air, enjoy diverse ecosystems and eat healthy food.

Standard Life is putting other companies and the Scottish Government's green "attempts" in the shade and demonstrates that there are economic as well as environmental consequences from climate change.

&#149 Dan Glass is a campaigner with environmental group Plane Stupid Scotland.

NO

MOST within the aviation industry recognise that aviation pollutes and that we must improve the environmental efficiency of today's operations and work on tomorrow's technologies.

The Stern review said that aviation accounts for 1.6 per cent of global greenhouse gas emissions, rising to 2.5 per cent in 2050, assuming no substantial technological breakthroughs. Given that the UK is responsible for just 2 per cent of the world's emissions, the impact of UK aviation on climate change is mathematically minimal. This is not an excuse for inaction, but aviation will only ever be a small part of the overall solution.

We are on the cusp of big advances in aircraft and engine technologies that will lead to dramatic reductions in emissions, which have not yet been factored into the environmental forecasts about our industry. In the meantime, airlines have an obligation to maximise their environmental efficiency (particularly by operating the cleanest available technology).

The same business model that gives us low fares (new aircraft, high occupancy rates, direct flights) also gives us environmental efficiency in the skies – EasyJet emits 27 per cent fewer greenhouse gases per passenger kilometre than a traditional airline on an identical route.

We also intend to play a leading role in improving the environmental performance of our industry. There is a lot to be done – reforming Europe's inefficient air traffic system, implementing a meaningful European emissions trading scheme, working on the next generation of aircraft, giving customers comprehensive environmental information and helping them to offset the carbon emissions of their flight.

&#149 Andy Harrison is the chief executive of EasyJet