News / SAF 'a unicorn' industry that could produce strong returns for investors

© Andrii Yalanskyi

Sustainable aviation fuel (SAF) is a ‘unicorn industry’ that could provide some 30% rate of return for big investors, while also achieving overwhelming environmental benefits, a senior industry stakeholder told The Loadstar. 

The aviation industry is at a pivotal point in achieving its net zero emissions target by 2050, and SAF production is estimated to account for about 65% of the mitigation needed to reach this. 

The production of SAF, however, is no longer an engineering problem, but a financial one.  

Indeed, for the level of production the industry requires – equivalent to filling 186,000 Olympic-sized swimming pools — in excess of $3trn in investment is needed.  

And the industry is significantly behind on this: last year air cargo saw only some 500,000 tonnes of SAF, a mere fraction of the estimated 500m tonnes a year needed by 2050, noted SVP of sustainability at IATA Marie Owens Thomsen. 

“So, to the biggest pools of capital in the world, I say, ‘it’s time to get out your chequebooks and start backing large scale ventures in SAF production’,” one executive said. 

“This is a gigantic opportunity waiting to happen, a whole new industry will emerge from this. We will clean the air, change aviation transportation forever and create thousands of new good jobs, and the returns can be very impressive,” he added.  

“Once the big capital pools jump in and start supporting this in a major way, the velocity of scaling up is going to surprise everybody; it’s going to be a phenomenal surge, a tsunami of growth.” 

While also being paramount to global decarbonisation, SAF production could offer hefty financial returns to investors, noted the executive.

“Analysis by pension-experienced financial experts shows that the risk-adjusted and pressure-tested returns on SAF could become quite substantial. Exhibiting ‘unicorn’ metrics as a whole new worldwide industry is created,” he explained.  

Mark Drusch, chief officer of cargo at Qatar Airways, told The Loadstar: “Any discussions with any investors [about SAF] have got to be based on a very solid business case, so it’s no different than going to talk to a banker.” 

But while investment from these large pools of capital is crucial, government subsidies could also make a weighty contribution to wide-scale production of SAF. The International Monetary Fund (IMF) reported that subsidies for fossil fuels in 2022 accounted for 7.1% of GDP worldwide, equating to $7trn. 

“Do you realise that we could do this entire thing on SAF just by shifting the emphasis from fossil fuels into subsidies for sustainable fuels? How wonderful would that be?” he asked.  

Brandon Sullivan, head of cargo at IATA, agreed. He told WCS delegates this year: “Production incentives are the way forward. Japan is a good example, the government has put a 10% [SAF] production mandate on fuel suppliers. 

“Singapore has also recently taken steps to create a sustainable air hub with a view to foster SAF production and use. The US is another with tax credits embedded in its Inflation Reduction Act that are resulting in increased production.  

“We need more governments to follow these positive examples,” he concluded.