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Shipping Banks Integrate Climate into Lending Decisions

Danske Bank headquarters
Danske Bank headquarters

By The Maritime Executive 06-17-2019 07:42:31

11 major shipping banks, representing a bank loan portfolio to global shipping of approximately $100 billion, will for the first time integrate climate considerations into lending decisions to incentivize maritime shipping’s decarbonization.

The Poseidon Principles are a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios. They are consistent with the policies and ambitions of the Initial GHG Strategy adopted in April 2018 by member states of the IMO. The strategy 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 percent of 2008 levels by 2050, with a strong emphasis on zero emissions.

The Principles establish a common baseline to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals. The Principles are intended to evolve over time as the IMO adjusts its policies and regulations and when further adverse environmental and social impacts are identified for inclusion. They also 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. They are implemented in internal policies, procedures and standards and applied in all credit products secured by vessels that fall under the purview of the IMO.

Founding Signatories include Citi, Societe Generale, DNB, ABN Amro, Amsterdam Trade Bank, Credit Agricole CIB, Danish Ship Finance, Danske Bank, DVB, ING and Nordea, and represent around 20 percent of the global ship finance portfolio. Additional banks are expected to join in the near future, including Asian banks.

The Principles were developed in an effort spearheaded by global shipping banks – Citi, Societe Generale, and DNB – and leading industry players – A.P.Møller Mærsk, Cargill, Euronav, 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.

“We encourage all our colleagues to join us in leading industry-wide change by becoming signatories of the Poseidon Principles,” says Kristin Holth, Executive Vice President, Global Head of Ocean Industries at DNB and member of the Poseidon Principles drafting committee.

“Shipping’s decarbonization 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-emission 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 catalyze this transition,” says Søren Toft, Chief Operating Officer and Executive Vice President of A.P. Møller-Mærsk.

“We are encouraging our shipowner partners to continually improve the environmental performance of their vessels. We welcome the Poseidon Principles and the positive impact they will have on the development of new technologies to fight climate change,” says Jan Dieleman, President of Cargill Ocean Transportation, operator of one of the world’s largest dry bulk charter fleets.

“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 percent by 2050. The Poseidon Principles are a significant step toward achieving this important goal,” says Hugo De Stoop, Chief Executive Officer of Euronav, the world’s largest, independent quoted crude tanker platform.

“Zero-emission vessels must enter the fleet by 2030 at the latest if the maritime industry is to successfully meet the IMO ambitions of at least 50 percent reduction in greenhouse gases by 2050. The 2020s will be a critical decade for not only piloting and prototyping new fuel types and energy sources but also building future fuel supply chains. The introduction of the Poseidon Principles demonstrates that ship finance is determined to support shipping’s decarbonization challenge across the maritime value chain and also support other factors such as the energy transition. As a strategic partner of the Global Maritime Forum, Lloyd’s Register is committed to working with all the Poseidon Principles partners to support the evolution of this landmark initiative,” says Alastair Marsh, Chiel Executive Officer of Lloyd’s Register.