While the maritime industry discusses short-term measures at the IMO’s MEPC 76, actors in finance, law and shipping explored shipping’s road to decarbonisation and net zero.
Namely, during the latest ICS Leadership Insights Live, Paul Taylor, Managing Director, Global Head of Shipping and Offshore, Société Générale and Vice Chair, Poseidon Principles, stressed the pivotal role banks have to play in financing vessels that will aid the decarbonisation of the shipping industry:
The starting point of the Poseidon Principles was that, as banks, around $450 billion dollars of senior debt is being paid to the industry, across about 70,000 commercial vessels. That is a privileged position to decide which ships are financed and which ships go on the water
However, the Poseidon Principles have come under fire recently for not going far enough in its ambitions,w ith Mr. Taylor stating:
That’s actually good to see, because when, when we launched two years ago, people were saying, this is unrealistic. Now we’re having the opposite, saying that we haven’t gone far enough. And I think that shows how far the industry has come. And what a shift has taken place in in in the industry to date
Regarding the finance landscape, Abhishek Pandey, Managing Director, Global Head Shipping Finance, Standard Chartered, told about the “drastic” changes that took place in the shipping finance landscape since the financial crisis.
In 2008, the top 20 banks funded around $350 billion in this [shipping] industry. In 2020, the top 20 banks only funded around $250 billion. Out of this EU market share has fallen drastically, exiting completely or reducing exposure to this investment significantly. In 2008, European banks accounted for 100% of the top 10 ship finance lenders, while in 2020 that number is around 50%
This has caused a diversification of financial sources for shipping and led to an increase in export credit agencies, alternative financing and leasing structures.
Furthermore, Mr. Pandey noted that banks will only continue with “an acceleration of the green agenda.” He also stressed that there is a “very evident change happening”, and that banks and other finance “are key to facilitate this transaction”.
Furthermore, when asked about the key challenges shipping faces on the road to energy transition, Svein Steimler, President and CEO NYK Group Europe, explained that the industry is an “extremely conservative business, that changes late and adopts late”, noting that it took four decades to ratify the ballast water convention.
He also added that while shipping was not the biggest polluting industry in the world, he is:
In part embarrassed to be part of an industry that has done so little for so long and shipping must do what it can, not simply talk and wait for something better
Beatrice Russ, Partner, Maritime, Aviation and Travel, Ince, also stressed that while things like the Poseidon Principles are indeed facilitating decarbonisation, ultimately regulation is what will create change.
All of us at a personal level and companies and corporations don’t always do the right thing, but if there is a regulation telling us what to do, or if we don’t comply there are consequences, that’s when we change our attitudes and move forward
Ms. Russ stressed that ESG is “creeping into contractual frameworks”, where someone wouldn’t expect it and will likely be a corner stone from now on.