Banks to integrate climate principles into loan decisions

Poseidon Principles require banks to disclose the climate alignment of their shipping portfolios with IMO’s target of 50% reduction of GHG emissions by 2050.

   Eleven banks that represent about 20% of the global ship finance portfolio signed up last week for the Poseidon Principles, which are guidelines to help banks “integrate climate considerations into lending decisions to incentivize maritime shipping’s decarbonization.”
   Under the principles, banks will disclose the climate alignment of their shipping portfolios with the International Maritime Organization’s goal of reducing greenhouse gas emissions by 50% of 2008 levels by 2050. The Poseidon Principles are consistent with the policies of the Initial GHG Strategy adopted in 2018 by IMO member states, according to a statement.
   The founding signatories include Citi, Societe Generale, DNB, ABN Amro, Amsterdam Trade Bank, Credit Agricole CIB, Danish Ship Finance, Danske Bank, DVB, ING and Nordea, which together represent a bank loan portfolio to global shipping of approximately $100 billion.
   “The maritime sector is a key facilitator of global trade. However, it’s critical that all industry participants address the climate impacts of the shipping industry,” said Michael Parker, Citi’s global industry head of shipping and logistics and the chair of the Poseidon Principles drafting committee, in the announcement.
   “As banks, we recognize 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.”
   The Poseidon Principles require signatories to annually measure the carbon intensity and assess climate alignment — the carbon intensity relative to established decarbonization trajectories — of their shipping portfolios. A single ship’s climate alignment is determined by comparing its annual carbon intensity with the decarbonization trajectory — a representation of how many grams of CO2 a single ship can emit to move one tonne of goods one nautical mile over a time horizon — for its ship type and size class. The climate alignment of a product or portfolio is a weighted average of the vessel carbon intensities in each product or portfolio, according to the Poseidon Principles’ website.
   Other principles include accountability, enforcement and transparency, which includes portfolio climate alignment scores to be published annually.
   The Poseidon Principles are applicable to lenders, relevant lessors and financial guarantors, including export credited credit agencies, and are implemented in internal policies, procedures and standards and applied to all credit products secured by vessels under the purview of the IMO. They are intended to evolve over time as the IMO adjusts its policies, according to the announcement.
   In addition to the banks, the principles were developed by industry players — such as A.P. Møller Mærsk, Cargill, Euronav, Lloyd’s Register and Watson Farley & Williams — with support from 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.
   “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% reduction in greenhouse gases by 2050,” Lloyd’s Register CEO Alastair Marsh said in the announcement. “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.”