4th Poseidon Principles report shows improvement in banks’ alignment with decarbonization targets

The Poseidon Principles, a regulatory framework for responsible financing of shipping, has released its fourth annual disclosure report sharing signatories’ climate alignment scores.

The initiative has grown in number, with 34 signatories from 13 different countries together representing around 80% of the global ship finance portfolio.

The results encompass the climate alignment scores of 30 signatories based on data from 2022, an increase of two signatories over last year’s report. The four signatories who joined in 2023 were not required to disclose information.

The simple average proportion of activity reported across the 30 signatories was 95.4%, the report said.

Furthermore, the results show that 11 portfolios were aligned with the 50% CO2 reduction trajectory, representing over a third of all signatories, up from a quarter last year.

The simple average score against this trajectory was +2%, meaning that, on average, the portfolios are 2% above the 2018 ambition of the IMO (or slightly misaligned).

This is a considerable improvement from last year’s average of +9.7%. Signatories’ scores against this trajectory ranged from -13.5% to +18.5%, with 63% reporting a score of +5% or less, marking yet another considerable improvement from the previous year’s range of -12.5% to +57.3%, with 50% reporting a score of +5% or less, the report said.

All of the signatories in the initiative chose to align the Poseidon Principles methodology with the new IMO ambition, including the goal of achieving net zero emissions by or around 2050. This decision also accounts for emission reduction milestones in 2030 and 2040, employing a comprehensive lifecycle well-to-wake approach and broadening coverage to include a more extensive range of GHG.

“As its first-ever assessment of climate alignment against multiple decarbonization trajectories aligned with the revised IMO ambition but also showing progress against the initial IMO ambition, the 2023 annual report illustrates how the Poseidon Principles aim to remain at the forefront of the latest global evidence and developments, especially at the IMO, even in the absence of all practical tools like the final IMO emission factors guidelines,” said Michael Parker, Poseidon Principles Chair and Chairman of Global Shipping, Logistics and Offshore, Citi.

“By committing to net-zero emissions by 2050 and establishing emission reduction checkpoints to report against, the Poseidon Principles are not just meeting regulatory standards; we are setting the bar higher for responsible and environmentally conscious ship finance.”  

“The reporting percentage of +95.4% stands as a testament to the strong endorsement from shipowners and clients, indicating a growing trend in which industry stakeholders recognize and value the advantages associated with a more transparent and collaborative approach,” said Paul Taylor, Poseidon Principles Vice Chair and Global Head of Maritime Industries, Société Générale.

“While Poseidon Principles signatories acknowledge significant challenges ahead, especially with the new IMO ambition to achieve net-zero by 2050, there is a collective sense of urgency, momentum and recognition of the task at hand.” 

Results for the optional cargo and passenger vessel scores showed the same positive trend. Six cargo vessel portfolios were aligned, representing 40% of reported data, up from four portfolios aligned, or 31% of reported data last year.

However, the simple average score for cargo portfolios remained relatively stable at +1.7%, compared to +0.8%. The range of scores for cargo portfolios also showed minimal change, from -9.8% to +11.9% this year, as opposed to the range of -10.7% to +7.4% reported last year (on 2021 data).

An improvement is noticeable in the percentage of cargo scores of +5% or less, which increased from 62% last year to 73% in this report. Passenger vessel portfolios demonstrated significant improvements, with climate alignment scores ranging from +0.6% to +32.4% this year compared to +26.8% to +82.8% last year.

The simple average result of +12.4% for passenger vessels is a marked improvement from the +46.6% reported last year, with over a third of signatories reporting a score of +5% or less, improving from zero last year.

The Dutch founder member of ABN Amro reported a 7% increase compared to last year amid disruptions in the shipping sector following the Russia-Ukraine conflict and the sustained high level of maritime trading activity post the peak of the Covid-19 pandemic. Meanwhile, BNP Paribas exceeded by 3.6%, Citi by 2.5%, and DNB by 1.4%, whereas Credit Suisse fell below by 4.6%.