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Today was the announcement of the “Poseidon Principles” involving 11 major shipping banks, representing a bank loan portfolio to global shipping of approximately $100 billion that will, for the first time, integrate climate considerations into lending decisions to incentivize maritime shipping’s decarbonization. These Poseidon Principles are a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios.
This is welcome news for ship owners as well as solution providers as capital is lean in shipping. 18 months ago, I asked a ship finance banker if they would consider financing climate mitigation equipment. He said “No we won’t. You can arrest ships [in a default] but you can’t arrest equipment.”
“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”, says Michael Parker, Global Industry Head of Shipping & Logistics at Citi and Chair of the Poseidon Principles drafting committee.
The Poseidon Principles are consistent with the policies and ambitions of the Initial GHG Strategy adopted in April 2018 by member states of the International Maritime Organization (IMO), a specialized agency of the United Nations responsible for regulating shipping. 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% 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.
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% of the global ship finance portfolio. Additional banks are expected to join in the near future, including Asian banks.
This is a tremendous step forward for shipping to reach its climate goals!