Transition risk assessment using traffic and geospatial data

In this paper, we develop a methodology to estimate the carbon footprint of thousands of airport infrastructures around the world and test for the existence of a relationship between carbon emissions and realised or expected returns in the private airport investment sector.

We propose a consistent methodology to assess the scopes 1, 2 and 3 of infrastructure companies (in this case Airports) and implement it for several thousands entities around the world. We use detailed geospatial and traffic data to predict scope 1 and 2 emissions several thousand airports across the globe. We also derive scope 3 emissions from highly granular cruise and landing and take-off (LTO) data.

We then analyse the link between carbon emissions and financial performance: we build a so-called factor replicating portfolio of high minus low carbon intensity using monthly price return data for private airports provided by infraMetrics® and attempt to determine whether this potential ‘factor’ has predictive power in terms of the returns of airports equity returns.