Societe Generale: financing CO2 shipping

Mr Taylor, who is also the vice chair of the Poseidon Principles, acknowledged their voluntary nature but stressed their power.

"The purpose of the Poseidon Principles is about transparency, consistency and accountability in our reporting of our carbon intensity on our portfolios. While it may not be enforceable, it is incredibly powerful because it drives our lending behaviour to support shipowners with similar commitments and standards," he said.

Emerging financing mechanisms and partnerships are pivotal in the evolving landscape of CO2 shipping and innovative tools like carbon-linked notes and sustainability-linked loans are gaining traction.

Societe Generale director of advisory (maritime industries) Chris Wright added to the role of structured financial products and long-term contracts, "Structured financial products have a huge role to play. They generally provide significant economic advantages, driving down the unit cost of CO2," Mr Wright stated.

He further highlighted the necessity of government support, noting, "CO2 is sub-economic without government support," underlining the critical role of public policies and subsidies.

Capital allowance within banks is increasingly influenced by environmental, social and governance (ESG) ratings and decarbonisation goals.

Mr Wright explained, "Banks will allocate more capital to projects that have an ESG profile in the long run, helping the credit story because the company is then paying less tax or meeting other climate goals."

A crucial concept discussed was appurtenance, the idea that onboard carbon capture equipment should be considered an integral part of the vessel. This designation allows for better security in financing, as banks could take mortgages over the entire vessel, including the retrofitted equipment.

Mr Taylor explained, "It comes down to either bringing in ECA credits or leasing structures where people take cash flow risk on the benefit from carbon capture."

Audience interaction provided additional insights, with key poll questions revealing preferences for financing options and identifying barriers to investment. The audience identified high upfront capital costs and concerns about commercial viability as significant hurdles.

The Societe Generale session underscored the collaborative effort required from all stakeholders to achieve scalability in CO2 shipping.

The future outlook for the industry was encapsulated in three words by the experts, Exciting, Complex and Challenging.

As Mr Taylor summarised, "We need to support the existing fleet’s decarbonisation while enabling new projects. It is a complex but exciting challenge that requires alignment and collaboration among all stakeholders."

Riviera’s CO2 Shipping & Terminals Conference, sponsored by Societe Generale Corporate and Investment Banking, provided an in-depth look into the financing needs for scalable carbon capture utilisation and storage (CCUS) and shipping.

The session at the Waldorf Hilton on 18 June 2024 adopted the popular BBC Question Time format, fostering dynamic discussions among experts on critical financial barriers and solutions for project developers and shipping companies.

The session kicked off with an exploration of assessment criteria from financiers.

Riviera’s CO2 Shipping, Terminals & CCS Conference, Americas will be held in Houston, Texas, 16 September 2024. Click here to register your interest in this industry-leading event.