Capital A ESG ratings reach soaring heights
Capital A received AirAsia’s GOLD Environmental Sustainability rating from the Centre for Asia Pacific Aviation (CAPA) in its 2023 CAPA-Envest Global Airline Sustainability Benchmarking report.

CAPITAL A has been ranked among top performers in global sustainability ratings following an effective revamp of its sustainability approach to prioritise group wide measures to address climate risks and improve stakeholder communication.

The group added another win to its impressive repertoire - receiving AirAsia’s GOLD Environmental Sustainability rating from the Centre for Asia Pacific Aviation (CAPA) in its 2023 CAPA-Envest Global Airline Sustainability Benchmarking Report.

AirAsia is one of 19 airlines to receive the rating on the back of a strong recovery of its efficiency and environmental performance as the airline group continues to rebuild its network post pandemic. AirAsia delivered the eleventh lowest carbon dioxide (CO2) emissions per passenger and twelfth lowest emission per seat in a survey of almost 80 airlines globally.

AirAsia’s Sustainability Day is an industry engagement aimed at building understanding and spark greater collaboration for aviation sustainability.

Concurrently, the London Stock Exchange Group ranked Capital A fifteenth out of 124 airlines using its environmental, social and governance (ESG) scoring that measures a company’s relative ESG performance, commitment and effectiveness across ten main themes. AirAsia’s score of 71% is not only highest among Asean-based carriers, it also lands the airline among top performing global low-cost carriers.

These recognitions add to a number of positive outcomes in ESG assessments by the company’s listed boards, published towards the end of 2023 based on 2022 sustainability disclosures. In Malaysia, Capital A’s ESG score rose to 3.2 from 2.9 out of 5 between 2020 and 2022, surpassing the 2.9 threshold of the FTSE4Good Bursa Malaysia (F4GBM) Index in all years of assessment.

The last national CORSIA task force meeting of 2023 was held at AirAsia RedQ with regulators, airlines, airports and other key stakeholders.

Capital A’s Thai associate Asia Aviation also saw its ratings soar to 81% from 67% between the 2021 and 2022 assessment cycles, ranking it among AA rated companies of the Stock Exchange of Thailand’s ESG Ratings.

Internationally, Capital A benchmarks against two global indices for publicly listed companies with market capitalisation of US$1billion and above. Capital A earned a score of 40% in the latest S&P Global Corporate Sustainability Assessment (CSA), up from 32% in 2020. S&P CSA scores are used for selection into the Dow Jones Sustainability Indices (DJSI) which aims to highlight eligible companies that demonstrate ESG leadership.

Attributing the achievements to Capital A’s well thought out sustainability efforts, Capital A chief sustainability officer Yap Mun Ching pointed out that there are fewer operational disruptions as airlines continue to recover post pandemic and this improved the company’s fuel performance.

AirAsia chief sustainability officer Yap Mun Ching says the group has expended a lot of resources to build better understanding on aviation sustainability among policy-makers, regulators, investors, partners and very importantly, their staff— Allstars.

Given that fuel use is the single biggest contributor to CO2 emissions by far, she explained: “As a result, it enabled us to reduce our carbon intensity back to pre-pandemic levels. In 2023, our carbon intensity (which is measured as CO2 emissions per seat and CO2 emissions per pax) fell below 2019 levels.

“For a narrow body jet operator of a regional network, this means we regain our lead as an airline with some of the lowest emissions intensity in the industry. Concurrently, we strengthened governance and reporting as detailed in the release.”

Elaborating on Capital A’s approach towards sustainability, Yap said the company zeroed in on six out of 17 United Nations Sustainable Development Goals (UNSDGs).

“We supported our assertions with analyses, data disclosures and measures. As we expanded our engagements significantly with stakeholders to educate and create awareness of aviation sustainability, we also increased our UNSDG targets to Goals 16 and 17 in 2022.

“This was to help build institutions and strengthen partnerships. We support these with a range of activities, for example, AirAsia chairing Malaysia’s national Carbon Offset and Reduction Scheme for International Aviation (CORSIA) task force and participating in International Civil Aviation Organisation’s (ICAO) Committee for Aviation Environment Protection working groups as technical experts,” she said.

Last year, Capital A also submitted its 2021 social performance disclosures for assessment under the Bloomberg Gender Equality Index (GEI), scoring above the inclusion threshold as well. Boosting Capital A’s performance is its track record in increasing female participation in jobs across the board.

The 2022 highlights include women making up 53.8% of all employees and 32% of all senior managers. AirAsia also maintained its lead as the airline employing the highest number of women pilots in Southeast Asia at 6.6%, above the global average of 5.8%.

As part of efforts to push diversity, equity and inclusion (DEI) in Capital A, Yap noted that the company had begun conducting a company-wide DEI survey in 2021 as well as a pay gap analysis across all levels and job types.

“It was found that the difference in pay between genders mainly occurs in operations jobs (pilots) which are determined by years of experience. For instance, more men being pilots longer, rather than any factor that pays women less. This will be addressed in time as more female pilots equal male pilots in seniority levels.

Furthermore, Yap shares that AirAsia is putting in place an extensive programme to improve working conditions for mothers in operational roles. These are mothers who work in our main frontline jobs namely pilots, cabin crew and engineers which face unique conditions due to the nature of their work.

“The first aspect of this programme is to ease their return to work post-maternity. Details of this programme will be announced shortly. We are also looking into the current regulations governing pregnant mums in operations.

“We are comparing regulations in South-East Asia (countries where we operate) with international standards (ICAO/EASA) with the goal of eventually working with regulators on harmonising our regulations on this issue with those recommended by international bodies,” she said.

Yap also highlighted that Capital A began reorienting Capital A’s sustainability focus in 2020 for a better balance between our external and internal sustainability priorities. She noted that while Capital A was very active in external social activities prior to 2020, the global pandemic necessitated a recalibration. This coincided with a period when climate change regulations on aviation were also beginning to take shape.

“There are two main prongs to our strategy. The first was to apply our cross-cutting cost and efficiency discipline to managing our ESG risks. One area where we can see the results of this approach is in the strengthening of our environmental strategy.

“In 2021, we published our first net zero roadmap to identify key pathways to decarbonisation. Every year since, we have added depth to our understanding and with the aid of data modelling, we have been able to better integrate ESG considerations into our overarching business strategy,” she added.

Yap said the second was to communicate more effectively.

“Aviation sustainability is a complex topic which is not easily accessible to our stakeholders. We expended a lot of resources to build better understanding among policy-makers, regulators, investors, partners and very importantly, our staff - Allstars.

“We revamped the way we report on our sustainability achievements to highlight data-based results and deliverables. Internally, we also enhanced governance by establishing Board sustainability committees, including appointing sustainability advisors to our Aviation Board Sustainability Committee, given the importance of this issue to our core airline business.”

This measure has been received well by the company’s stakeholders. In December 2023, Maybank Investment Bank Research published a report maintaining a BUY call for Capital A shares, citing its “commendable” long term ESG targets and “refreshing” report.

In the latest report cycle for 2023 performance, Capital A and Asia Aviation (sole shareholder of Thai AirAsia) will both be publishing standalone sustainability reports to give more emphasis to sustainability and complement the entities’ drive to further strengthen communication of their ESG priorities and strategies.

Between 2020 and 2023, Capital A remained eligible for ESG benchmarking assessments by these two global indices but not for inclusion due to a pandemic-induced drop in market capitalisation during the reporting periods. Capital A expects further improvement in its market capitalisation as AirAsia returns to full fleet operations in 2024.
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CAPITAL A has been ranked among top performers in global sustainability ratings following an effective revamp of its sustainability approach to prioritise group wide measures to address climate risks and improve stakeholder communication.