Banking Sector Increases Ship Finance Transparency, new report says

Photo: 149816317 © Michele Ursi |

More than two dozen international banks have reported emissions data of their ship finance portfolios in the third Poseidon Principles Annual Disclosure Report 2022. The report visualizes the hard road ahead to reduce emissions. The data remains influenced by Covid-19.

The report includes a more granular disclosure of emissions data which will allow financial institutions to better understand their carbon footprint and jointly promote the maritime industry’s transition to zero emissions.

Out of the 28 financial institutions reporting their emissions data during 2022 (up from 23 the year before), seven banks are aligned with the International Maritime Organization (IMO)’s ambition of reducing greenhouse gas emissions from international shipping by at least 50% by 2050.

“This year’s reporting is the most granular and extensive yet, and more banks have joined the initiative, which is very encouraging. I am pleased that Signatories have been willing to be even more transparent about the make up of the carbon footprint in their portfolios. Being transparent is the only way we can make change happen and better support clients in the crucial years for shipping decarbonization ahead of us,” says Michael Parker Chairman, Global Shipping, Logistics and Offshore, Citi, and Chair of the Poseidon Principles.

The Poseidon Principles are a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios pioneered in 2019 by Citi, Societe Generale, and DNB with the support of the Global Maritime Forum.

Mr. Parker is not discouraged that only a minority of reporting banks are aligned with the 2050 target.

“We are on a multi-year journey, but with this data we can see our performance, and support our decision-making with insight. Reducing GHG emissions has become a priority in the maritime industry, including for ship finance. However, ships have a 20+ year lifecycle. It will take time for this trend to be reflected in our portfolios, even with the banks favouring low-carbon projects,” he says.

The report collates ship emissions data collected by lenders from their clients for their activities in 2021. This data is then compared to a decarbonisation trajectory for the same year to show whether, at that point in time, a ship finance portfolio was compatible with a 50% reduction of emissions by 2050.

More than 70% of the portfolio

The Poseidon Principles were launched in 2019 with 11 founding Signatories and have since grown to 30 financial institutions covering more than 70% of the global ship finance portfolio. Three Signatories joined the Principles after December 2021 and are not required to report this year. One bank chose to do so, nevertheless.

In addition to their overall portfolio climate score, 14 Signatories disclosed individual scores for passenger vessel portfolios, cargo vessel portfolios, or both. This data generally shows that COVID-19 continued to have a negative impact on the climate scores because of congestion and the slow recovery in the cruise business with much shorter cruises as the sector started to resume activity.

Future alignment

In September 2022, Poseidon Principles Signatories committed to aligning the framework with the ambition of the Paris Agreement to limit global temperature rise to 1.5 degrees above pre-industrial levels by 2100. The banks will measure their climate alignment against this ambition once a Paris-aligned trajectory or trajectories are identified and officially adopted by the Signatories. Such a trajectory or trajectories have not been approved yet and are therefore not included in the report.

Once a new trajectory comes into effect, both the current IMO-aligned trajectory and a Paris-aligned trajectory will be used as benchmarks. However, Signatories have also committed to evaluating the current trajectory following the expected adoption of the Revised IMO GHG Strategy at MEPC 80 in July 2023, including raising its levels of ambition. It is hoped that the Annual Disclosure Report 2023 will include reporting against both a Paris-aligned and a revised IMO-aligned trajectory.

The Annual Disclosure Report 2022 was produced by the Global Maritime Forum, which performs secretariat services for the Poseidon Principles, with expert support provided by UMAS.

Source: Poseidon Principles

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