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Influencing Shipping Industry's Climate Performance by Scoring Lenders

lender report on environmental performance of shipping portfolio

By The Maritime Executive 12-15-2020 07:09:08

In a first-of-its-kind climate report, 15 of the major lenders financing the shipping industry disclosed the climate alignment score of their ship finance portfolios. Released in The Poseidon Principles Annual Disclosure Report 2020, the climate assessment offers banks insight into their lending decisions, compares performance with competing financial institutions, and is designed to encourage lenders to work with their shipping clients to ensure that they are taking steps to meet the industry’s emissions goals.

The first of its kind report by the signatories of the Poseidon Principles shows that only three banks' ship finance portfolios are aligned with UN decarbonization targets while 12 banks' portfolios are not. The portfolio assessment builds on 2019 emissions data from shipping clients compared to a decarbonization trajectory for the same year. In addition to the scores, the report also includes commentary from financial institutions on key takeaways from their climate assessment and reflections on how it will inform their business activities and decision-making in the future.

In total, 20 financial institutions have joined the Poseidon Principles and together they represent over $150 billion in loans to international shipping. That represents more than a third of the global shipping finance portfolio. Announced in June 2019, the Poseidon Principles became the first sector-specific climate alignment agreement for financial institutions.  

"This report marks a significant milestone for global ship finance and for climate finance reporting as a whole. I commend my fellow Signatories for their pioneering efforts to be transparent and accountable for their role in promoting responsible environmental behavior. I encourage other serious banks and export credit agencies to join us in supporting global seaborne trade in a sustainable manner," says Michael Parker, Chairman, Global Shipping, Logistics and Offshore, Citi, and Chair of the Poseidon Principles Association.

The Poseidon Principles establish a global framework to quantitatively assess and disclose whether financial institutions' lending portfolios are in line with climate goals set by the International Maritime Organization (IMO). The IMO's initial GHG strategy prescribes that international shipping must reduce its total annual greenhouse gas emissions by at least 50 percent of 2008 levels by 2050, whilst pursuing zero emissions as soon as possible in this century.

"This first climate assessment reporting provides the financial institutions with a unique understanding of our ship finance portfolios' climate footprint. All industry participants must collectively rise to the climate challenge. Banks under the Poseidon Principles will continue to work proactively with their clients and other important stakeholders to shape a better future for international shipping and society," says Paul Taylor, Global Head of Shipping and Offshore, Societe Generale, and Vice Chair of the Poseidon Principles Association.

The principles were developed by global banks – Citi, Societe Generale, and DNB – in collaboration with leading industry players, including A.P. Møller Mærsk, Cargill, Euronav, Gram Car Carriers, Lloyd's Register, and Watson Farley & Williams. Expert support was provided by the Global Maritime Forum, Rocky Mountain Institute, University College London Energy Institute, and UMAS.

The Poseidon Principles Annual Disclosure Report 2020 includes climate alignment reporting from 15 financial institutions ranging from ABN Amro to BNP Paribas, Citi, Danske Bank, DNB, and Societe Generale. Five financial institutions joined the Poseidon Principles in 2020 and will be added to the report in 2021 while the association is encouraging other institutions to also join in signing the principles.