EU maritime sector set to benefit from new sustainable finance package

On 21 April, the European Commission adopted a “sustainable finance” package to help improve the flow of money towards sustainable activities across the European Union.

Illustration. Image by Navingo

By enabling investors to re-orient investments towards more sustainable technologies and businesses, the measures are expected to be instrumental in making Europe climate neutral by 2050. 

This package comprises the EU Taxonomy Climate Delegated Act, the EU Taxonomy’s first act with technical screening criteria defining which economic activities contribute substantially to meeting the EU’s climate objectives.

“We are taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green. This will be essential if we are to mobilise private investment in sustainable activities and make Europe climate-neutral by 2050,” Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said.

The package is also comprised of a proposal of a Corporate Sustainability Reporting Directive (CSRD) that aims to improve the flow of sustainability information in the corporate world.

Finally, the package encompasses six amending Delegated Acts on fiduciary duties, investment and insurance advice will ensure that financial firms, e.g. advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients.

“The financial system plays a crucial role in the delivery of the EU Green Deal, and significant investments are required to green our economy. We need all companies to play their part, both those already advanced in greening their activities and those who need to do more to achieve sustainability,” Mairead McGuinness, Commissioner responsible for financial services, financial stability and the Capital Markets Union, noted.

Today’s (21 April) new rules are a game changer in finance. We are stepping up our sustainable finance ambition to help make Europe the first climate-neutral continent by 2050. Now is the time to put words into action and invest in a sustainable way.”

Once formally adopted, the EU Taxonomy Climate Delegated Act will be scrutinised by the European Parliament and the European Council.

Regarding the CSRD Proposal, the EC will engage in discussions with the European Parliament and Council.

The six amendments to Delegated Acts on investment and insurance advice, fiduciary duties, and product oversight and governance will be scrutinised by the European Parliament and the Council and are expected to apply as of October 2022.

SEA Europe: Access to sustainable finance key to drive green waterborne transport transition

The Shipyards’ & Maritime Equipment Association of Europe (SEA Europe), an organization that represents close to 100 percent of the European shipbuilding industry, said it appreciates that the EU Taxonomy classification system has recognized that the manufacturing, repair, maintenance and retrofitting of ships is an “enabling activity” in that it provides products, services and technologies necessary for the climate transition of waterborne transport.

Illustration. Image by Navingo

According to SEA Europe, Europe’s shipyards and maritime equipment manufacturers are at the forefront of the European Green Deal in that they develop environmental and climate-friendly technologies making waterborne transport green and climate neutral.

Sustainable finance will be key in stimulating and rewarding investments into green and climate neutral ships and technological solutions. In this regard, SEA Europe has been supporting the goals of the EU Sustainable Finance Taxonomy to channel investments towards sustainable activities.

However, SEA Europe has also stressed that, in order to be successful, the taxonomy needs to be based on clear, well-defined, technically sound, technology neutral and goal-based parameters which reflect a sector’s specificities. Furthermore, these parameters need to be reviewed and updated regularly, with the full involvement of stakeholders.

The organization added that further extensive work will be needed to ensure that the taxonomy criteria will be adequately refined and updated to be robust, technically-sound, realistic and reflective of technology evolution, whilst ensuring that competitive access to green finance in Europe.

“Europe’s maritime technology sector will be a key enabler to achieve the objectives of the European Green Deal. To that end, SEA Europe’s wants to ensure that Europe’s shipyards and maritime equipment manufacturers will have access to sustainable finance which fully supports the key enabling role of the sector,” Christophe Tytgat, SEA Europe’s Secretary General, said.

“Access to competitive green finance is and remains paramount for a capital-intensive industry like the maritime technology industry, especially in times of severe and unfair global competition from Asia.”

ECSA welcomes recognition of shipping as transitional sector in sustainable finance package

Separately, the European Community Shipowners’ Association (ECSA) — the voice of the European shipping industry — said it welcomes that the shipping industry has been recognised as a transitional sector.

The European shipping industry is committed to achieve its decarbonisation and environmental objectives.. At the same time, being a capital intensive industry where many vessels are one of a kind, it is also key to ensure access to innovative and sustainable solutions, which can drive the entire maritime industry towards a greener and more sustainable future. Hence transition financing is vital,” Martin Dorsman, ECSA Secretary-General, commented.

This Climate Delegated Act delivers the first set of technical criteria for defining which shipping activities contribute substantially to climate mitigation and adaptation, the first two of the six environmental objectives defined by the Taxonomy Regulation. ECSA warns, however, that the technical screening criteria for maritime transport in its current format, as defined by the Climate Delegated Act, is far too restrictive, which bears the risk of endangering the transition. As the commission communication states, the EU Taxonomy does not currently define how activities other than green are to be treated.

In this light, ECSA welcomes the clarification from the European Commission that the EU Taxonomy Climate Delegated Act is a living document, which will be subject to regular necessary updates.

 “Besides the technical details, there are however principles that should be the building blocks when developing and updating the technical screening criteria” Dorsman further said.

ECSA welcomes the commission’s commitment to ensure  that the taxonomy remains science-based and technology neutral. Along this principle, European shipowners find it important that the technical screening criteria remains consistent along the entire supply chain, which needs further improvement.

One example is the consistency between rules applicable for manufacturing of a vessel and the operation of the vessel. Furthermore, when seeking to lower emissions and improve on other environmental objectives, the shipping industry is not only dependent on other stakeholders (e.g. shipbuilders, engine manufacturers, the fuel supply chain, port infrastructure).

According to ECSA, it also has to be carefully assessed where the shipping industry has power to influence the transition due to their economic activities. Given that the shipping’s economic activity is asset-based (the vessels) and that the cargo it carries is dependent on market demand and supply of stakeholders from other industrial sectors, considering cargo as part of the shipping maritime activity under the shipping taxonomy will lead to negative and unintended consequences.

It would be highly counterproductive and unfair to penalise financing for the shipping industry based on cargo carried.  In addition to driving away financing for innovative solution, it bears the  risk to accelerate an inefficient modal shift,” Dorsman explained.