To align lending practices with net-zero shipping by 2050 the Poseidon Principles will be revised, and banks will look to support projects that continue to move industry ‘in the right direction’
With low- and zero-carbon marine fuels rare commodities, ‘true blue’ zero-carbon shipping projects remain elusive, whether you are a shipowner or a bank.
“We would love to finance your zero-carbon shipping project today,” said ING Bank director, sector coverage, transport and logistics, Jens Van Yperzeele, “but there are not enough projects to do that. The challenge is not to come up with that project because it is probably going to take a while for that to be on a commercial scale. The challenge for us is to find a path in between what keeps our regulators … happy [and] actually moves us in the right direction. It is not just ticking a box [noting] we have done something that has a green tinge to it. I mean, that’s just not going to cut it.”
Presenting on ‘A bank’s view on funding zero-carbon shipping projects’ at Maritime Decarbonisation Conference Asia in Singapore in April, Mr Van Yperzeele said ING Bank was a founding member of the Poseidon Principles and collaborator on industry initiatives, including the Responsible Ship Recycling Standards and the Lloyd’s Register-led Silk Alliance Green Corridor Cluster.
“The times of greenwashing are probably behind us,” said Mr Van Yperzeele, observing that banks faced tough questions about providing financing for exhaust gas scrubbers three or four years ago. “I do not want to rehash that debate. I think there is use on both sides, but I think we are quite keen that whatever we do now, better stand the test of time,” he said.
“The times of greenwashing are probably behind us”
Noting increased pressure from equity investors regarding shipping portfolios had changed banks’ minds pretty radically, Mr Van Yperzeele said: “You know greenwashing is not something that we are here for. So, it is only going to drive us to consider true zero-carbon shipping projects as they emerge.”
He cautioned: “Do not underestimate how much ESG is already driving decisions within banks.”
During the transition to future fuels, commercial banks’ preference for newbuildings will have to change. “We are having to challenge ourselves to think a lot more about retrofits, especially during the transition phase when we’re going to have dual fuel,” he said.
But financing shipping projects as a whole is becoming more complex, including how you determine a ship’s valuation. “If I finance the ship today, what will it be worth in five to 10 years’ time, if I finance against it? It’s a very real concern for us,” he said.
Further complicating the picture is uncertainty around future fuels and the technology risks that they bring, as well as Scope 3 emissions under which, shipowners will have to consider emissions outside of their control and in their supply chain.
And even banks’ existing frameworks, the Poseidon Principles, will need to be revised to align with net-zero ambitions. At present, the principles align with climate considerations based on IMO’s initial greenhouse gas (GHG) strategy in 2018. The target was to reduce GHG emissions by at least 50% by 2050 compared to 2008 levels.
This goes astray of the 2050 net-zero goals of the Net Zero Banking Alliance (NZBA), a global group of banks that represents about 40% of global banking assets.
“Under Poseidon Principles methodology, and by extension the IMO methodology, you are not really aligning with your Net Zero Banking Alliance goals, which is a problem,” said Mr Van Yperzeele.
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