Banks that signed up to the Poseidon Principles of green financing have revealed for the first time how their vessel portfolios match up with decarbonisation targets.
The annual disclosure report 2020 is the first sector-specific climate alignment document of its kind — and a fascinating snapshot of where some huge lenders stand at this stage of the industry's journey to a more environmentally-friendly future.
ABN Amro, Amsterdam Trade Bank, BNP Paribas, Bpifrance Assurance Export, CIC, Citi, Credit Agricole CIB, Danish Ship Finance, Danske Bank, DNB, Eksportkreditt Norway, ING, Nordea, Sparbanken Vest and Societe Generale.
The results reveal three ship finance portfolios are now aligned with the International Maritime Organization's initial greenhouse gas strategy.
The figures also show how the data will change the banks' approach to lending in future.
The average score of the 15 lenders was 1.2% above the required alignment benchmark at this stage.
Norwegian tops the charts
Eksportkreditt Norway performed the best, with a carbon intensity of 44.92% below the compliant level — mainly due to it financing newbuildings.
The lender described its result as "good". Olav Rygg, head of lending, said: "However, given that there are fewer newbuilds delivered in 2020 the score is likely to go down next year."
And the part of the portfolio that falls under the scope of the Poseidon Principles is "unfortunately very limited", he said, as most ships are offshore service vessels that are not considered to be trading internationally and/or are below 5,000 dwt.
Bpifrance Assurance Export was a clear second on 43.43% below the benchmark.
The lender said measuring the score allowed it to gather concrete figures on the carbon impact of the shipping portfolio.
"These data helped us validate different hypotheses we had on the industry and figure out the remaining paths needed to achieve the sustainability targets set by the IMO," the bank said.
Cruiseships helped by state action
Bpifrance general manager Francois Lefebvre said decreasing the carbon footprint of the cruiseship portfolio fell within a larger set of measures taken by the French government to encourage transition towards greener industries.
"The Poseidon Principles represent an efficient way to provide actual figures, enabling all the players of this specific industry to better set and reach their decarbonisation objectives," he said.
The other lender to make the grade was Dutch bank ING at 0.36% below the threshold.
Amsterdam Trade Bank (ATB) came out the worst at 31.58% above the benchmark, due to its larger share of older vessels.
ATB said the operation of "underperforming" vessels will need to be closely monitored and actions for improvement will need to be considered by the relevant stakeholders.
Fuel considerations
The bank will now consider financing more fuel-efficient vessels, as well as focusing on routes sailed.
A large ship with a big engine is not likely to be efficiently used on short routes and its high emissions could influence the bank’s decision to finance it, ATB said.
"This is another concrete step for ATB to continue to improve further its shipping finance business while accounting for its environmental impact," Iraklis Tsirigotis, head of shipping finance and ATB managing director, said.
“This is not a sprint, but rather a marathon, which requires a lot of small but steady steps over time."
20 banks now on board
A total of 20 lenders have joined the Poseidon Principles, representing more than $150bn in loans to shipping, or more than one-third of the global shipping finance portfolio.
Those who took part from this year, including Credit Suisse, SEB, SpareBank 1 and Sumitomo Mitsui Trust Bank, are not required to report before 2021.
"This report marks a significant milestone for global ship finance and for climate finance reporting as a whole," said Michael Parker, chairman of global shipping, logistics and offshore at Citi, and chair of the Poseidon Principles Association (PPA).
"I commend my fellow signatories for their pioneering efforts to be transparent and accountable for their role in promoting responsible environmental behaviour."
Rising to the challenge?
Parker is encouraging other lenders to take part.
Paul Taylor, global head of shipping and offshore at Societe Generale, and vice chair of the PPA, said: "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."
The guidelines were developed by Citi, Societe Generale and DNB in collaboration with leading industry players AP Moller-Maersk, Cargill, Euronav, Gram Car Carriers, Lloyd’s Register and Watson Farley & Williams.
Support was provided by the Global Maritime Forum, among others.
