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News / Business/ 11 Major shipping banks base lending decisions on ‘Poseidon Principles’

11 Major shipping banks base lending decisions on ‘Poseidon Principles’

18 Jun 2019
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Eleven major shipping banks, representing a bank loan portfolio to global shipping of approximately $100 billion, will for the first time integrate climate considerations into lending decisions to incentivise maritime shipping's decarbonisation, they say.

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.

They will adopt the ‘Poseidon Principles’, a global framework for assessing and disclosing the climate alignment of financial institutions' shipping portfolios.

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. The strategy prescribes that international shipping must reduce the total annual GHG emissions by at least 50% of 2008 levels by 2050.

The Principles were developed by global shipping banks and leading industry players with expert support provided by the Global Maritime Forum, Rocky Mountain Institute and UCL Energy Institute.

“As banks, we recognise that our role in the shipping industry enables us to promote responsible environmental stewardship. 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.

“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,” says Paul Taylor, Global Head of Shipping & Offshore at Societe Generale Corporate & Investment Banking.

“We encourage all our colleagues to join us in leading industry-wide change by becoming Signatories of the Poseidon Principles,” says Kristin Holth, Executive Vice President, Global Head of Ocean Industries at DNB.

"The Poseidon Principles are a groundbreaking achievement that will help ensure shipping remains a foundational component of our global economy. The Principles also represent a leading example for other sectors to follow into the low-carbon future,” says Jules Kortenhorst, CEO of Rocky Mountain Institute.

“Shipping will shortly undertake a rapid technology and fleet change as it inevitably shifts away from fossil fuels in order to decarbonize. That change exposes many in the shipping industry, but particularly the banks, to risk. If banks discover too late, they have invested in ships that will become undesirable or even obsolete because of this change, they could see valuation write-downs or even defaults in their portfolio. The Poseidon Principles are a tool to demonstrate that these key stakeholders are acting responsibly and allow them to compare climate risk with each other, but also a tool that will allow them to manage critical investment risks, retaining their crucial role in providing the liquidity that enables international trade.” Dr Tristan Smith, Reader in Energy and Shipping, UCL Energy Institute.

“The Poseidon Principles are the starting point for pricing in the climate risk of financial institutions’ ship finance portfolios. The disclosure of a bank’s portfolio climate alignment score is the catalyst for banks to start thinking about why particular ships in their portfolio don’t perform as well as others compared to the climate target. It provides the impetus for determining what solutions can be applied to reduce their carbon footprint in the future and to consider the risk of devaluation if they remain exposed to fossil-fuel dependent assets. This will become increasingly important as the shipping industry moves away from fossil fuels to clean fuels.” Dr Sophie Parker, Principal Consultant, UMAS.

Published: 18 June, 2019
 

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