Aircraft and Ships

Our Approach to Our Sustainability Themes

Aircraft Business

• Recognizing the strong social demand for reduced CO₂ emissions in the airline industry, we will provide supplementary support for meeting the emission reduction targets of airline companies as an operating lease provider. We therefore aim to increase the ratio of new models with good fuel efficiency in our aircraft portfolio.
• We will consider investments and loans related to sustainable aviation fuel (SAF).

Ship Business

• For our owned vessels, ORIX in principle operates ships with specifications that improve fuel efficiency and reduce environmental impact. In addition to selling older ships with poor fuel efficiency, we are considering introducing ships which utilize next generation fuels such as LNG, methanol, or ammonia.
• We are currently carrying out discussions and considering participation in demonstration projects and test voyages for energy saving technologies and biofuels.
• We will increase sustainability linked loans.

Business Activities and Sustainability Themes Matrix

Environmental consciousness in our aircraft operating leases

• #Climate change / Reducing GHG emissions

ORIX Aviation Systems Limited—a wholly owned subsidiary of ORIX—manages 144 aircraft through asset management services in addition to its own fleet of 52 aircraft. Avolon Holdings Limited (Avolon), a company in which ORIX has 30% ownership stake, has ordered 456 aircraft in addition to its own 534 strong fleet (data as of end of March 2024).
Societal demand on the aviation industry to reduce CO₂ emissions is significant, and the entire industry has been formulating reduction targets and action plans to achieve these targets. Many airlines are also implementing measures such as setting preemptive reduction targets. In October 2021, the International Air Transport Association (IATA) adopted a goal of net-zero carbon emissions by 2050. In 2016, the International Civil Aviation Organization (ICAO) resolved to introduce a scheme that stipulates the obligation to set CO₂ emissions allowances for 193 countries. As of 2021, the scheme is in operation in 88 countries. In 2027, airlines in all member states will be required to purchase CO₂ emissions offsets in the form of carbon credits.
Serving as an operating lease company, ORIX believes it is essential to increase the percentage of its fleet of new fuel-efficient aircraft models to complement the airline's emissions reduction targets. In addition, we recognize accelerating promoting the use of alternative fuel SAF (Sustainable Aviation Fuel: aviation fuel made from raw materials other than fossil fuels) is a crucial theme for reducing emissions.
As of December 2023, 60% of Avolon's fleet was comprised of new models, and one of its goals is to increase this to 75% by 2025. All of the 456 aircraft on order are new models. In June 2021, Avolon placed an order for up to 500 electric vertical takeoff and landing aircraft (eVTOL)^* for a total investment valued at 2 billion USD. Avolon is aiming to reduce CO₂ emissions from its own operations (such as in offices or from business travel) with the goal of achieving net zero emissions by 2025. Avolon is also working to reduce emissions from leased aircraft by replacing the fleet with newer models.
Details regarding Avolon's various initiatives can be found in its Sustainability Report 2023.

• A motorized aircraft that takes off and lands vertically and has the characteristics of a helicopter, drone, and small airplane. It does not require a runway and is characterized by low noise. It does not emit greenhouse gases when driven, and its maintenance costs are lower than those of helicopters. It is expected to have a variety of uses, including logistics, short-distance passenger transport, medium- to long-distance travel, and emergency transportation.

Environmental considerations in ship investment (ownership and operation)

• #Climate change / Reducing GHG emissions
• #Biodiversity / Environmental conservation

As of March 2024, ORIX possesses 67 commercial vessels in its fleet.
There are concerns about the environmental impact of ship operations, such as CO₂ emissions from fuel use and the impact of ballast water on marine ecosystems. ORIX is working to reduce the environmental impact and improve the fuel efficiency of its fleet. Future shipbuilding orders will, in principle, be for vessels that comply with international regulations effective from 2025, which will require vessels manufactured from 2025 onward to emit 30% less CO₂ than the baseline.
Several examples of ORIX's efforts to make its fleet more environmentally friendly are outlined below.

• Introduction of LNG dual fuel vessels

Most commercial vessels use heavy fuel oil to operate, but the number of ships which run on LNG is increasing. ORIX has ordered six auto carrier ships (slated for delivery between 2025-27) which are LNG 'dual fuel' vessels. These ships employ cutting-edge technology which allows the ships to run on both heavy fuel oil and LNG to reduce their environmental impact. LNG has significantly lower GHG and pollutant emissions compared with heavy fuel oil. The specific amount of reductions is thought to be as follows: CO₂, more than 20% reduction; SOx (sulfur oxides), 100% reduction; NOx (nitrogen oxides), more than 90% reduction (if assuming premixed combustion); and particulate matter, 100% reduction.

• Installation of Alternative Maritime Power systems

Alternative Maritime Power systems work to protect port environments by allowing vessels to turn off on-ship power generator engines while in dock overnight. Necessary power is supplied from land-based sources, which thereby reduces emissions of environmentally harmful materials from ships. Installing these systems is said to potentially reduce CO₂ emissions from ship by around 60%. We plan to install these systems on the six LNG dual fuel vessels that have already been ordered.

• Installation of PBCF (Propeller Boss Cap Fins)

PBCF are energy saving devices installed on ship propellors. They eliminate the hub vortex^* generated by the back part of the propellor, and can help reduce fuel consumption by 5% by improving propellor efficiency. We have PBCF installed on nine of our owned ships.

• Hub vortex is the vortex generated around the center of the rear part of the propellor, and is one factor that reduces their efficiency.

Ship finance (sustainability linked loans)

• #Climate change / Reducing GHG emissions

ORIX's Ship Finance business offers a sustainability linked loan. This loan is based on the annual CO₂ emissions of the ship to be financed, and if the annual CO₂ emissions of the ship are less than the standard value after the loan is disbursed, the interest rate for the following year will be preferentially applied. CO₂ emissions are calculated by the Nippon Kaiji Kyokai (ClassNK) to ensure objectivity and fairness. Through this loan, we are contributing to the decarbonization of the shipping industry from a financial perspective.

Establishing a safe work environment for seafarers

• #Promoting a circular economy
• #Safe working environment

There are roughly 1,500 seafarers operating the 67 vessels in ORIX's owned fleet (as of end-March 2024). Our efforts to establish a safe work environment for them are outlined below.

• Managing the health of seafarers and reducing food loss

ORIX has installed equipment to keep food fresh on its vessels. A well-balanced diet is essential for the health and wellbeing of seafarers on long voyages; however, perishable foods such as fruits and vegetables are difficult to keep for long periods of time, which can lead to spoilage. As a result, unbalanced meal content and loss of foodstuffs loaded on board have been issues in ship operations. By installing equipment, we have been able to improve working environments and reduce food loss in consideration of the health of ship crew.

• Improving communications

Typically, time lags and capacity limits make it difficult for seafarers to connect with family and friends while in transit, and better communications technology is a key factor in improving on ship life for seafarers. ORIX has equipped two of its coastal vessels with Space X's satellite Internet services Starlink, which has contributed to a dramatic improvement in communications speed. We also plan to gradually install the service on oceangoing vessels going forward.

• Utilizing IT for work management

Attendance records for seafarers have typically been created and managed on paper, making it difficult for ship owners to quickly get an accurate picture of working hours. As appropriately managing working hours helps both maintain seafarers' health and a safe work environment, ORIX has implemented a cloud-based attendance and timesheet management system for seafarers, which both reduces back office work for managing this data and contributes to an improved work environment for them.