Shipping finance banks and industry stakeholders agree to include climate considerations when scrutinising loan applications
Eleven major shipping banks, representing a bank loan portfolio to global shipping of approximately US$100Bn (20% of global shipping loans) will for the first time integrate climate considerations into lending decisions. The aim is to incentivise maritime shipping’s decarbonisation under the Poseidon Principles: a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios.
Founding signatories include Citi, Societe Generale, DNB, ABN Amro, Amsterdam Trade Bank, Credit Agricole CIB, Danish Ship Finance, Danske Bank, DVB, ING and Nordea.
The Poseidon Principles were developed with leading shipping industry players – Euronav, AP Møller-Mærsk, Cargill, Lloyd’s Register and Watson Farley & Williams – with expert support provided by the Global Maritime Forum, Rocky Mountain Institute and University College London Energy Institute.
Euronav’s new chief executive officer Hugo de Stoop said “The shipping industry is determined to meet the ambitions of the Initial IMO GHG Strategy and to reduce the industry’s total annual GHG emissions by at least 50% by 2050. The Poseidon Principles are a significant step toward achieving this important goal.”
“As banks, we recognise that our role in the shipping industry enables us to promote responsible environmental stewardship throughout the global maritime value chain. The Poseidon Principles will not only serve our institutions to improve decision making at a strategic level but will also shape a better future for the shipping industry and our society”, said Citi’s global industry head of shipping and logistics and chair of the Poseidon Principles drafting committee, Michael Parker.
AP Møller-Mærsk’s chief operating officer and executive vice president Søren Toft said “Shipping’s decarbonisation will require unparalleled innovation. A modern ship is a highly capital-intensive asset with a typical life span of 25-30 years. To deliver on ambitious climate targets, zero-emissions vessels will need to enter the fleet by 2030. This leaves us only 10 years to develop the new marine fuels, propulsion technologies and infrastructures that will be required. The Poseidon Principles will help us catalyse this transition.”
The Poseidon Principles are consistent with the policies and ambitions of the Initial GHG Strategy adopted in April 2018 by member states of IMO, which prescribes that GHG emissions from international shipping must peak as soon as possible and that the industry must reduce the total annual GHG emissions by at least 50% of 2008 levels by 2050, with a strong emphasis on zero emissions.
The Poseidon Principles establish a common baseline to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals and in this way, they also serve as an important tool to manage critical investment risks.
The Principles are intended to evolve over time as IMO adjusts its policies and regulations and when further adverse environmental and social impacts are identified for inclusion and aim to support other initiatives developed to address climate, environment and social risks, such as the Principles for Responsible Banking, Energy Transitions Commission, and the Task Force of Climate-Related Financial Disclosures.
The Poseidon Principles are applicable to lenders, relevant lessors, and financial guarantors including export credit agencies and applied in all credit products secured by vessels that fall under the purview of IMO.
“The introduction of the Poseidon Principles demonstrates that ship finance is determined to support shipping’s decarbonisation challenge across the maritime value chain and also support other factors such as the energy transition,” said Lloyd’s Register’s chief executive Alastair Marsh.
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