How to direct capital towards cleaner aviation: a new scientific discussion shows that the decarbonization of aviation will be decided not only in laboratories and hangars, but also by investment decisions that encourage – or hinder – the riskiest, but also most transformative technologies. As global passenger and freight traffic recovers and grows year after year, aviation emissions, still one of the fastest-growing sources of climate pollution, are once again under scrutiny. At the heart of the issue is the question: how to shape investment incentives to drive change faster than what would happen through "market evolution" alone?

Why aviation is a "hard nut to crack" for decarbonization

Aviation is often described as a "hard-to-abate" sector because energy density, safety, and reliability face strict limits within it. The energy content of kerosene, airport infrastructure, certification processes, and the lifespan of the aircraft fleet create a strong status quo. In practice, this means that money too often goes into small steps – more efficient next-generation engines, aerodynamic refinements, or operational optimizations – while projects that could reverse the emissions curve remain undercapitalized because they carry more technological and market risk. Precisely for this reason, the idea is not to avoid risk, but to distribute it intelligently across portfolios.

From vision to tool: an index that makes decoupled growth measurable

In the academic community, a proposal for the Aviation Sustainability Index (ASI) has been presented – a quantitative tool that helps investors, sovereign funds, and airlines assess which technology portfolios truly reduce emissions per passenger-kilometer or per tonne-freight-kilometer. The idea is simple but powerful: to shift the focus from "what is new" to "what is measurably better" in terms of climate impact. The ASI should, for example, differentiate between a project that delivers 1–2% fuel savings on the existing fleet and one that can trigger structural change – e.g., through e-fuels or hydrogen – even if the latter is more expensive and further in the future. This provides investments with a metric that is aligned with real climate outcomes, not just technological attractiveness.

Capital seeking a framework: how to shift the risk curve

Despite geopolitical shocks and changes in climate policies, the available sources of capital for clean technologies are increasing. The problem is the lack of a framework to direct this capital towards the riskiest, yet most potent areas. Investors and R&D managers instinctively lean towards projects that fit more easily into today's fleet and supply chain – such as upgraded engines, retrofits, and recycled fuels – because the path to certification and revenue is shorter. But for aviation to truly move emissions towards zero, more "disruptive" bets are needed: new platforms, new energy supply lines, new business models, and contractual arrangements that reward measurable climate impact.

The regulatory signal: what changes from 2025 onwards

In 2025, Europe introduced mandatory sustainable aviation fuel (SAF) blends into jet fuel, with an initial share that gradually increases in the coming years. This sends a clear signal of demand and predictability to the supply chain, which is crucial for closing the financing for new refineries and electro-fuel plants. In parallel, the global scheme for international aviation is establishing an offsetting and emission reduction mechanism, creating additional pressure on companies to identify real, not just accounting, reductions. For investors, these signals mean less regulatory uncertainty and easier due diligence.

The state of SAF production: the reality of the numbers and what follows

SAF production increased in 2024, but it still represents only a fraction of global jet fuel consumption. Although many announced plants have postponed their commercial start-up to the first half of 2025, the numbers still hover below one percent of the total market. In 2025, production growth is expected, but not a dramatic leap that would by itself satisfy European blending mandates and the voluntary needs of global carriers. The lesson for investors: most value is created where bottlenecks are solved – secure feedstock flows, reliable availability of renewable hydrogen and CO₂ for e-fuels, and standards for measuring impact. Without these elements, financial closings remain slow, and the cost of capital remains high.

Asia on the offensive: capacity growing faster than demand

In 2025, a series of projects are opening in Asia that increase the regional supply of SAF, while blending obligations in many countries are only set to begin from 2026. The result is a possible short-term oversupply and pressure on prices, with export potential to markets with firm mandates. For European and Middle Eastern carriers, this is an opportunity for long-term contracts under more competitive margins, but also a risk due to feedstock volatility and the regulatory redirection of trade flows.

Engine and aircraft technologies: between evolution and revolution

Open-fan, high-bypass configurations, and system hybridization promise double-digit fuel savings on future narrow-body aircraft. Demonstration programs involving major engine and aircraft manufacturers are entering ground and flight-testing phases. But even in the best-case scenario, these are solutions that will enter the fleet late in the decade – and their full impact will only be felt as older aircraft are retired. In the meantime, what happens with fuels and operations is decisive: as soon as the volume of sustainable fuels is increased through mandatory blends and offtake agreements, every percentage of engine savings is multiplied into a real drop in emissions.

What about hydrogen?

Concepts for hydrogen-powered passenger aircraft have garnered global attention, but development is complex: it requires entirely new infrastructure, logistics, and certification frameworks. In 2025, an alignment of expectations is visible: initial targets for the mid-2030s are being pushed back by at least a few years. This does not mean giving up – on the contrary, system demonstrations, cryogenic tanks, and early short- and medium-haul routes are still being intensively researched – but the investment horizon is longer, and the return is conditional on complementary investment in energy and infrastructure. For investors, this means a different risk-benefit curve, with greater sensitivity to regulatory signals and the cost of capital.

Investors: how to distinguish "mature efficiency" from "disruptive change"

For growth funds, corporate VCs, and banks, filtering is key. Projects that deliver 1–3% fleet-level savings are valuable when multiplied, but they rarely change the ratio of emissions to demand growth. On the other hand, higher-risk projects – e-fuels (Power-to-Liquid), low-carbon-footprint thermochemical conversions, hydrogen propulsion systems, and radical designs – can redefine the equation, but they carry technological, regulatory, and market risk. The ASI helps quantify these differences by ranking portfolios based on their real emissions impact, not just their marketing appeal. Ultimately, the goal is to build a portfolio where "mature efficiency" and "disruptive change" are not mutually exclusive but mutually reinforcing.

Frameworks for cooperation: coalitions of R&D, carriers, and financiers

Progress happens when research institutes, manufacturers, carriers, and investors are brought to the same table. Coalitions that combine venture capital with public incentives – guarantees, contracts for difference, green loans – reduce the cost of capital and accelerate the path to market. Joint funds launched by airlines with strategic partners are already investing in a range of technologies: from direct air capture of CO₂, to advanced SAFs, to digital tools for measuring life-cycle emissions. This shortens the period between laboratory verification and a commercial contract with deliveries.

What the numbers from industry and policy show

In 2025, mandatory SAF shares in Europe and the further operationalization of the global mechanism for international flights represent a dual incentive: more secure demand and pricing for producers, and a clearer signal to carriers and leasing companies on how to plan their fleets. At the same time, industry reports indicate that SAF production in 2025 will be in the order of magnitude of a few million tonnes – far below what is needed for a rapid, linear replacement of kerosene. Thus, it is strategically sensible for investments to branch out: short-term into "closest-to-market" technologies, medium-term into fuel capacities and traceability, and long-term into hydrogen and e-fuels.

Market opportunities in the SAF value chain

Value is not created in reactors alone. Long-term offtake agreements, traceability standards, geographic diversification of feedstocks (waste oils and fats, lignocellulose, renewable hydrogen and CO₂ for e-fuels), integration with energy markets, and credit and tax incentives – all of these make the difference between a pilot project and a bankable factory. In addition, digital platforms for tracking life-cycle emissions are becoming a necessary tool for proving climate benefits and avoiding "greenwashing".

New generation engines: open fan and fuel savings

New generation engine programs with open-fan architecture and improved thermodynamics are targeting double-digit fuel savings compared to today's standards. Collaborations between major engine and aircraft manufacturers are entering testing phases for system components, aerodynamic integration, and acoustics. Such projects are gaining more space in manufacturers' strategies because they offer a realistic path to reducing fuel burn on large narrow-body fleets, and thus a visible impact on emissions in the next decade.

The risk waterline: what it means for portfolios

For institutional investors, the key is to create portfolios that combine "safe" savings with "disruptive" risk. Part of the capital belongs to engine and operational efficiency; part belongs to the industrialization of SAF; and part to long-term technologies like hydrogen and e-fuels. Such an approach reduces dependency on a single regulatory outcome and builds resilience to changes in energy and carbon prices. In practice, this also means flexible financing structures – for example, tranches activated after technical milestones, contracted premiums for fuel deliveries, or hybrid forms of capital.

The role of states: smart incentives instead of vague targets

Declarations of "net-zero by 2050" remain important for direction, but the market needs instruments that can be contracted. These include guaranteed purchase agreements, differential premiums for e-fuels, tax breaks for investments, and accelerated permitting procedures for plants. Combined with clear rules on feedstock sustainability and transparent methods for calculating life-cycle emissions, such incentives can lower the cost of capital and shorten the "time-to-market" for projects that look expensive today but will become the foundation of competitiveness tomorrow.

The carrier perspective: how to make procurement a lever for change

Airlines have already shown that they can accelerate the commercialization of technologies through joint funds and long-term contracts. Offtake agreements for SAF and e-fuels, partnerships with manufacturers and start-ups dealing with CO₂ removal, and the integration of emissions data into booking and pricing systems are turning "willingness statements" into operational plans. This is also a strong message to investors: when demand has a customer's face and a delivery date, the risk is lower, and projects become bankable.

Airport infrastructure and energy: the silent link in the chain

A lot depends on airports. On-site blending and storage of SAF, the supply of renewable electricity for e-fuels and hydrogen, and the upgrading of safety and logistics standards are prerequisites for scaling. Airports that are the first to develop a "green hub" – where energy, fuel, and traffic meet – will have a competitive advantage in attracting carriers, investments, and carbon-sensitive passengers. Cities and regions thereby gain development levers that go beyond aviation.

Measuring impact: no investment confidence without data

A standardized, verifiable, and interoperable methodology for measuring emissions throughout the entire life cycle of fuels and technologies is key to credibility. Otherwise, financial markets cannot accurately value the climate benefit. That is why it is important for projects to establish data collection and independent verification systems in the early stages, and for investors to condition financing on precisely this transparency. This is not a bureaucratic imposition, but the foundation of market liquidity and a reduced cost of capital.

How to correctly read "hype" and realistic timelines

The difference between demonstration and scaling is often underestimated. Producing a thousand tonnes of e-fuel and delivering it to one route is a success, but moving to hundreds of thousands or millions of tonnes requires stable sources of cheap green electricity, a reliable CO₂ supply, long-term contracts, and financial structures that amortize price risks. The same applies to hydrogen: demonstration flights and prototypes are important, but without infrastructure and industrial integration, they remain a niche. Investors need to separate PR from bankability, through technical milestones, LCA methodologies, and contractual structures that turn promises into measurable deliveries.

What follows in 2025–2035: scenarios and milestones

In the next decade, a combination of three trends is expected. First, fleet savings through engine and aerodynamic modernization will gradually reduce emissions intensity. Second, mandates and voluntary agreements will increase the share of SAF – with regional differences depending on policy and energy prices. Third, hydrogen and e-fuel projects will enter demonstration phases on commercial routes, with limited scope but a high signaling effect for capital markets. Milestones to watch: the first commercial contracts for e-fuel delivery for scheduled routes; certification of higher blend ratios in operations; and test flights of platforms with new propulsion concepts in collaboration with engine and aircraft manufacturers.

Why strategic patience delivers alpha returns

Investing in aviation decarbonization is not a one-dimensional "technology bet," but an orchestration of technology, policy, and markets. Portfolios that combine short-term, medium-term, and long-term value streams – with rigorous measurement of actual emissions impact – are more likely to outperform the average. This is precisely the difference between passively following trends and actively shaping the market: capital that dares to be "smartly risky" has the chance to secure both a climate and a financial dividend.

Editor's note: The dates, obligations, and figures in the text are aligned with the situation as of October 22, 2025, with a focus on current industrial and regulatory shifts affecting investment decisions in aviation.