More than two dozen international banks have reported emissions data of their ship finance portfolios in the third Poseidon Principles Annual Disclosure Report 2022. The report visualizes the hard road ahead to reduce emissions. The data remains influenced by COVID-19.
This year’s report includes a more granular disclosure of emissions data which will allow financial institutions to better understand their carbon footprint and jointly promote the maritime industry’s transition to zero emissions.
Out of the 28 financial institutions reporting their emissions data this year (up from 23 the year before), seven banks are aligned with the IMO’s ambition of reducing greenhouse gas emissions from international shipping by at least 50% by 2050.
This year’s reporting is the most granular and extensive yet, and more banks have joined the initiative, which is very encouraging. I am pleased that Signatories have been willing to be even more transparent about the make up of the carbon footprint in their portfolios
said Michael Parker Chairman, Global Shipping, Logistics and Offshore, Citi, and Chair of the Poseidon Principles.
The report collates ship emissions data collected by lenders from their clients for their activities in 2021. This data is then compared to a decarbonisation trajectory for the same year to show whether, at that point in time, a ship finance portfolio was compatible with a 50% reduction of emissions by 2050.
In addition to their overall portfolio climate score, 14 Signatories disclosed individual scores for passenger vessel portfolios, cargo vessel portfolios, or both. This data generally shows that COVID-19 continued to have a negative impact on the climate scores because of congestion and the slow recovery in the cruise business with much shorter cruises as the sector started to resume activity.
Future alignment
In September 2022, Poseidon Principles Signatories committed to aligning the framework with the ambition of the Paris Agreement to limit global temperature rise to 1.5 degrees above pre-industrial levels by 2100.
The banks will measure their climate alignment against this ambition once a Paris-aligned trajectory or trajectories are identified and officially adopted by the Signatories. Such a trajectory or trajectories have not been approved yet and are therefore not included in this year’s report.
Once a new trajectory comes into effect, both the current IMO-aligned trajectory and a Paris-aligned trajectory will be used as benchmarks.
However, Signatories have also committed to evaluating the current trajectory following the expected adoption of the Revised IMO GHG Strategy at MEPC 80 in July 2023, including raising its levels of ambition.
It is hoped that the Annual Disclosure Report 2023 will include reporting against both a Paris-aligned and a revised IMO-aligned trajectory.
COVID-19 continues to impact climate alignment
Relative to 2020’s scores, 2021’s climate alignment scores were marked by continuous COVID-19 induced impacts on shipping, both on different vessels and vessel types.
Most Signatories with high misaligned scores attribute this to the passenger vessel segments, as these services were still recovering from the impact of the pandemic in the first half of 2021.
Many of these passenger vessels are higher value than freight carrying vessels and can be associated with large debt exposure; therefore, even a portfolio with a small number of passenger vessels can be strongly negatively affected overall.
However, seeing cruise and passenger shipping starting to recover and vessels returning to operation, these Signatories are optimistic for 2022.
As for cargo vessels, Signatories have attributed their misaligned scores to supply chain disturbances, including higher-than-normal waiting times, higher shipping speeds and port congestion resulting from the increasing shipping activities post-COVID-19 restrictions around the world.
Reflecting on the disclosure of more granular scores, some Signatories highlighted how this data provided useful insights and enabled them to better reflect differences in the makeup of their portfolios.
Generally, in addition to a vessel’s technical characteristics, many Signatories found vessel operations, especially speed, an important driver of carbon intensity.
explore more at poseidon principles’ report
