Banks to consider shipping’s decarbonisation in lending decisions

Banks to consider shipping’s decarbonisation in lending decisions

11 major shipping banks including Citi, Societe Generale, and DNB, representing a bank loan portfolio to global shipping of approximately US $100 billion, will integrate climate considerations into lending decisions to incentivise decarbonisation of the global shipping industry.

This is the first time international banks have aligned their lending decisions to promote greener global shipping through a global framework known as the Poseidon Principles. The framework will assess and disclose the climate alignment of financial institutions’ shipping portfolios.

The Poseidon Principles are consistent with the policies and ambitions of the Initial Greenhouse Gas (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 per cent of 2008 levels by 2050, with a strong emphasis on zero emissions.

The Poseidon Principles establish a common baseline to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals. In this way, they also serve as an important tool to manage critical investment risks.

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.

“As banks, we recognise 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”, said Michael Parker, global industry head of shipping & logistics at Citi and chair of the Poseidon Principles drafting committee.

“The Poseidon Principles offer significant benefits to the global shipping industry and society and they allow us as banks to align and de-risk our portfolios in line with shipping’s green transition”, commented Paul Taylor, global head of shipping & offshore at Societe Generale Corporate & Investment Banking and deputy chair of the Poseidon Principles drafting committee.

“We encourage all our colleagues to join us in leading industry-wide change by becoming Signatories of the Poseidon Principles”, added Kristin Holth, executive vice president, Global Head of Ocean Industries at DNB and member of the Poseidon Principles drafting committee.

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 per cent 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.