Controversial JAL Transition Bond
JAL issued the world's first transition bond in the airline industry on February 2, 2022. JAL explains that Transition Bonds are issued by companies whose strategy is to achieve long-term goals consistent with the Paris Agreement and to use the proceeds to fund initiatives that contribute to the transition to a decarbonized society (transition). JAL's Transition Bond has been selected as a model case study by METI and has received a second party opinion from Sustainalytics. But the substance of the Sustainalytics assessment is not something JAL can boast loudly about. It is unfortunate that few market participants have read this much into it, and many are just aware that they are getting a second opinion.
The cornerstone of the Transition Bond evaluation is whether JAL's transition strategy has goal that is in line with the Paris Agreement and whether it has a scientific basis for explaining the path way it will take to achieve those goals.
Sustainalytics' evaluation of this point is extracted and transcribed below.
- The Company’s short- and medium-term targets for CO2 emissions reduction toward its climate transition are not fully aligned with a science-based trajectory of the 1.5°C or 2°C scenarios under the Paris Agreement.
Specifically, according to the TPI benchmarks (High Efficiency scenario),
which rely on the IEA’s modelling, JAL needs to improve its CO2 intensity by
approximately 30% by FY2025, and 45% by FY2030 (compared to the FY2019
level) to be in line with the 2°C scenario under the Paris Agreement. The
improvement of CO2 intensity targeted by JAL against its “Business-AsUsual” (BAU) scenario was around 6% by FY2025 and 20% by FY2030, falling
short of the TPI benchmark trajectory.
- Nevertheless, Sustainalytics considers that the ATAG’s “Waypoint 2050” and
other reports, which are referenced by JAL, are acceptable scenarios for
setting long-term targets, and views positively that JAL is aiming to achieve
net zero emission by FY2050 as its long-term target.
- Refer to the “Assessment of JAL’s Sustainability Strategy” section for
details.
In short, Sustainalytics also said that the path to the 2 degree goal of the Paris Agreement cannot be said to be scientifically based. However, JAL only says net zero by 2050, so that part will be taken into account. That's why it is “partially” aligned.
I can't understand why JAL can brag about thier own transition bond with the second party opinion that is inarticulate.
Below is a second opinion from Sustainalytics.
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