This joint report by David Lowe, VP Marketing Aviation at Fexco & PACE, and the Ishka SAVi team combines Ishka’s summary of recent developments on the EU’s incoming Omnibus Package with the perspective of Fexco & PACE on its potential implications for aircraft lessors.
The EU’s Corporate Sustainability Reporting Directive (CSRD) marked a significant milestone in advancing transparency and accountability in sustainability reporting. And yet, with most companies only just beginning to implement the rules, political pressure and concerns about global competitiveness have already pushed the EU to consider significantly reducing the scope of sustainability reporting.
In this joint report between Ishka SAVi and PACE, Fexco’s sustainability data and analytics division, we examine what is known about the incoming Omnibus Package, which is expected to redefine the scope of CSRD and assess whether lessors should, at this stage, reconsider their reporting efforts.
The Omnibus Package: what we know so far
An omnibus package in legislation is a bill that combines multiple measures, often covering a wide range of topics. These packages are typically large and complex, bundling together different provisions that may or may not be directly related. Because of their size and scope, omnibus bills can be controversial, as they sometimes include provisions that might not pass on their own. The Omnibus Package expected to be unveiled by the European Commission is made up of three parts, with the first one set to be announced on 26th February, although there are rumours that the announcement could slide into March.
First mentioned by Ursula Von der Leyen on 8th November 2024 as part of a “simplification revolution”, the package is meant to reduce the “bureaucratic burden” in the EU Taxonomy Regulation, CSRD, and the Corporate Sustainability Due Diligence Directive (CSDDD). While details remain unclear, the Competitiveness Compass, released last month, describes it as a “far-reaching simplification” in sustainable finance reporting, sustainability due diligence, and taxonomy rules. In short, when it comes to CSRD, the planned reduction could shrink the number of companies subject to the directive and the depth of disclosures required.
Legislative changes set to be proposed as part of the package include cutting reporting obligations by at least 25% for all companies and 35% for SMEs, with the second Omnibus Package in Q2 2025 focusing on small mid-caps (a new category comprising companies larger than SMEs but smaller than large enterprises). According to Responsible Investor, the scope of the CSRD could be limited such that around 85% of the companies currently covered would be exempted.
The incoming proposal has become a topic of heated debate, with the opposing (or sceptical) camp including various groups, from trade unions to a group of major investors representing $6.6 trillion in assets under management.
PACE’s view on impacts for lessors
In aircraft leasing, a capital-intensive industry, any reduction in reporting obligations will naturally be welcomed. Currently, many lessors have less than 250 employees (medium-sized enterprises) but they qualify based on assets and turnover as Large Undertakings. Although there is yet no official clarity on how the existing CSRD criteria will be altered, a planned simplification could potentially shrink the number of companies in scope for CSRD and the depth of disclosures that will be required, While this possibility of escaping the net is tantalising, any changes in reporting obligations will not see lessors taking their eyes off the financial impacts, risks and opportunities of carbon emissions related to their financed assets.
Carbon data as a financial indicator - asset value is everything
Financial reporting is the backbone of business strategy, guiding investment decisions, risk assessments, and long-term planning. Increasingly this applies to carbon emissions data. So even if CSRD’s scope is weakened under the imminent Omnibus Package, lessors should still treat “carbon accounting” as an integral financial discipline because in leasing, asset value is everything.
Historically, aircraft age has been a key indicator of asset desirability, particularly when considering portfolios and the weighted average age therein. The current lack of supply of new aircraft across the industry means that, as latest-generation aircraft portfolios age, fuel efficiency and the associated carbon intensity are currently considered as longer-term factors in asset value, and lessors’ risk managers have been steadily gathering data on it in recent years. Carbon considerations in risk assessment range from the future “leaseability” of certain aircraft types driven by concerns from airlines facing increased environmental scrutiny, to more fundamental concerns of future stranded assets, prevented from flying in certain markets because they do not meet emissions standards. Even with simplified CSRD reporting, the rationale for aircraft lessors to understand their carbon emissions remains intact. Much as regulatory uncertainty would not dictate financial prudence, lessors who proactively monitor their indirect carbon emissions will continue to stay ahead of financial, regulatory, and market shifts, protecting asset value and strengthening investor confidence.
Omnibus rules versus market preferences
While it would be an exaggeration to say that at the time of writing CSRD appears to be at a crossroads, European financial policy experience suggests regulators will not be alone in shaping the rules, as investors, banks, and insurers have been a driving force in demanding carbon transparency. Often it is capital, not rules, which encourages disclosure. Aircraft lessors do not exist in a vacuum. They are financial entities that often depend on capital markets, which are increasingly pricing in climate risk. Whether or not the EU forces lessors to disclose sustainability metrics in the simplified CSRD, it is likely that banks and investors will. Aircraft are long-term assets, and financiers underwriting aircraft transactions are driven by the long-term viability of these investments. Any perceived unmanaged carbon risk in the sector could see investors move their capital elsewhere. Global requirements in sustainability led by the International Sustainability Standards Board (ISSB) will continue driving institutions to account for climate risk in annual statements.
Even if the Omnibus Package results in aircraft lessors worrying less about what they need to report today, it will not change how their businesses will be viewed tomorrow.
In conversation with, and with sincere thanks to Gerry Hastings, CEO Fexco Aviation Services.
