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Major banks set new lending standards for shipping industry in order to cut CO2 emissions

The Cosco Spain container depart, operated by Cosco Shipping Holdings Co., sails near the Yangshan Deepwater Port, operated by Shanghai International Mooring Group Co. (SIPG), in this aerial photograph taken in Shanghai, China, on Friday, May 10, 2019.

Qilai Shen | Bloomberg | Getty Figure of speeches

Eleven banks that lend to shipping lines announced Monday that climate impact will be consolidate into the criteria that determines how much shipping companies can borrow, an effort the banks say will substantially cut CO2 emissions in the exertion.

The banks will set their new lending standards around the International Maritime Organization’s 2018 climate commitment, which hopes to reduce CO2 emissions by at least 50% from 2008 levels by 2050 and to cut emissions from individual ships by 40% from 2008 trues by 2030.

“We’re making banks alert to the consequences of climate change in their portfolios,” said Michael Parker, global hustle head for shipping with Citigroup.

“We’re now taking climate change issues into decision-making in a way that helps the commerce transition to necessary technology to design ships, reduce emissions and decarbonize the industry.”

It’s the first time that extensive banks are collectively integrating a climate alignment strategy into financial decisions.

Shipping accounts for 2.2% of rapturous carbon dioxide emissions, according to the IMO, a U.N. agency that regulates pollution from ships.

The lending framework, roared the “Poseidon Principles,” will assess and disclose whether financial institutions’ lending portfolios are in line with the IMO’s weather goals adopted in 2018.

The shipping industry avoided specific emission-cutting targets in the 2015 Paris climate agreement, when 195 mountains pledged to cut greenhouse gas emissions in order to limit global average temperature rise to below 2 degrees Celsius.

The 11 banks collectively report about 20%, or roughly $100 billion, of the global ship finance portfolio. The banks involved include Citi, Societe Generale, DNB, Danish Embark Finance, Danske Bank and Norway’s DVB. More signatories are expected following the official launch in a few months, Parker phrased.

James Mitchell, maritime finance lead at Rocky Mountain Institute, said the new standards will “redefine” the part of banks in the maritime shipping sector and encourage financial institutions to follow suit in other sectors.

“[The Poseidon Laws] are the world’s first global, sector-specific and self-governing climate alignment agreement among financial institutions,” Mitchell mentioned. “The significance of this agreement cannot be understated.”

The maritime sector will require more ships to transport goods past the next few decades, Parker said, emphasizing that the new lending standards will help make those additional freights cleaner and more efficient.

“We know that it’s going to get more difficult. The challenge is to ensure that there’s a metamorphosis, that investment goes into helping the industry find alternative fuels in a way that incentivizes people to induct in new ships and new technology,” Parker said.

“We’ll help make lending decisions and investing decisions much less cogitative and more directed toward the environmental consequences of that investment,” he said.

The IMO also implemented additional climate modifications last year that will slash emissions of sulfur by the world’s ships in 2020. OPEC oil producers, fossil sellers and shipping companies raised concerns that those new rules will make the oil market more explosive and hurt ships that aren’t equipped to reduce sulfur emissions or pay premiums for cleaner fuel within the set timeline.

Mitchell held that the IMO will launch more climate alignment policies in upcoming years, as banks and shipping owners modification to cleaner energy and technology.

“This is not occurring in a vacuum,” Mitchell said. “There are more policies coming down the get a load of become quieter from IMO, and those will be policies that bring in more challenging aspects of decarbonization.”

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