Poseidon Principles signatories make progress in decarbonizing shipping

11 out of 23 ship finance portfolios are aligned with the International Maritime Organization’s (IMO) decarbonization target. In 2020, only 20% of reporting signatories were aligned with this goal, according to a new Poseidon Principles report.

The second Poseidon Principles Annual Disclosure Report 2021 is said to reflect the signatories’ leadership in climate finance and determination to decarbonize global shipping even in the face of short-term challenges in certain parts of the sector.

“I am very encouraged by the strides we have made as we continue with our goal of transparent reporting of our shipping portfolios. Covid-19 has presented challenges for shipping that have distorted some signatories’ alignment scores,” Michael Parker, Chairman, Global Shipping, Logistics and Offshore, Citi, and Chair of the Poseidon Principles Association, commented.

“We note the clear call at COP26 and at the IMO to raise the IMO’s ambition to zero emissions and the signatories will focus on this ambition early next year as we consider the continuing evolution of the Poseidon Principles and the example we are setting for other industries.”

Eight of the 23 signatories reported for the first time this year. The assessment by each signatory includes emissions data collected from borrowers and portfolio information at the end of 2020, compared to a decarbonization trajectory for the same year.

Three signatories who joined in 2021 have voluntarily disclosed their results, which was not required of them until the next report. There are currently 29 signatories of the Poseidon Principles.

Impacts on this year’s reporting

For this year’s reporting, the Poseidon Principles methodology was updated to reflect the IMO 4th GHG Study and the decarbonization trajectories thus differ from the previous year.

However, the framework and assessment still bring important insights to signatories and continue to inform their decision-making.

“The overall score for the signatories to the Poseidon Principles was strongly influenced both by the updated methodology and the consequences of the Covid-19 pandemic. However, misalignment in some cases does not mean that there is no progress made collectively,” Paul Taylor, Global Head of Shipping and Offshore, Société Générale, and Vice Chair of the Poseidon Principles Association, said.

“As a group, we are increasing transparency and having more discussions about tangible next steps for the Signatories and their clients.”

Impact of Covid-19

Covid-19’s impact on international shipping meant drastic changes in operation for some segments, mainly cruise and passenger vessels, leading to increasing carbon intensity.

This is reflected in distorted climate alignment scores of some reporting banks with high exposure to the segment, but not expected to be a long-term change for the decarbonization of shipping.

“It is important to take the unprecedented years 2020 and 2021 into consideration. For some of us, this brought a positive change to our ship finance portfolio while for others, it increased emissions and the overall score we report,” Stephen Fewster, Managing Director and Global Head of Shipping, ING, and Treasurer of the Poseidon Principles Association, said.

“However, we do not believe that these events will alter the long-term ambition of the Poseidon Principles to encourage and help the industry to decarbonize.”

Last week, six marine insurers launched an initiative to provide transparency on carbon emissions and support the shipping industry’s green transition.

The six marine insurers — Swiss Re, Gard, Hellenic Hull Management, SCOR, Victor International, and Norwegian Hull Club — have established the Poseidon Principles for Marine Insurance framework that will help them engage with the shipping industry and support net-zero insurance.

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