MUFG EMEA has today published a new whitepaper examining how Sustainable Aviation Fuel (SAF) can become bankable at scale and explains how the solutions are within reach.

The paper, titled “Beyond mandates: Turning SAF demand into bankable projects", identifies the structural challenges restricting SAF deployment and outlines strategies to improve bankability and raise the investor confidence required for industry growth.

The challenge

The carbon footprint of the global aviation sector has steadily grown in recent years, accounting for more than 2.5% of global emissions [1]. While SAF is recognised as the most viable near-term solution to reach net zero by 2050, the pace of deployment remains insufficient. Global production has increased by 1,150% since 2021,[2] and it will need to keep up this rate of growth to meet the demand for SAF which we expect to rise steeply over the next decade.

Barriers to bankability

The whitepaper highlights that to move from ambition to action, risks across the entire value chain must be holistically assessed and shared. Securing creditworthy long term offtake agreements remains a significant challenge, as buyers are reluctant to commit amid market uncertainty and the high cost of SAF, which currently ranges from two to nine times that of conventional jet fuel [3]. Technology and feedstock costs drive this cost gap. Feedstock scarcity and complexity add further difficulty to securing long-term supply.

Ed Craddock, Managing Director, Energy Structured Finance, MUFG EMEA, said:

"The banking sector is keen to support the decarbonisation of the aviation industry and draws confidence from the progress made so far. The motivation is clear across stakeholders, and appetite is growing, but a considered approach to risk allocation will be needed.

"We believe that pathways to unlock financing can accelerate the commercial deployment of SAF. The risks facing the SAF market aren't new. Every newly-established clean technology has faced bankability hurdles that have been overcome through effective structuring and sector-wide collaboration. Achieving bankability requires a balance of creative thinking and learning lessons from other sectors."

Click here to download the full report.

1 Our World in Data, 'What share of global CO2 emissions come from aviation?'

2 International Air Transport Association (IATA), Net Zero 2050: Sustainable Aviation Fuels (SAF)

3 Gov.UK, UK SAF mandate