After the release of the Poseidon Principles and increased pressure from governments, banks should now consider climate impact when making lending decisions. For this, there are now new tools on the market to help financial institutions measure the carbon footprint of the vessels in their supply chain.
Decarbonising shipping
2021 witnessed numerous international agreements to reduce greenhouse gas (GHG) emissions throughout the maritime space. This included the IMO introducing measures such as the Carbon Intensity Indicator (CII) and Energy Efficiency Existing Ship Index (EEXI), which are short term solutions for decarbonising shipping that will become mandatory in January 2023.
Additionally, a group of banks that represent a combined portfolio of over $185 Billion - nearly 50% of the global ship finance portfolio - have come together as signatories of the Poseidon Principles. These Principles represent a self-governing climate alignment agreement amongst financial institutions.
What are the Poseidon Principles?
The framework includes four principles that are used as guidance for the participating banks to ensure that the vessels they finance are reducing their GHG emissions to net-zero or at least by 50% by 2050.
By incorporating such principles, financial institutions can align their ship finance portfolios with responsible environmental behaviour and incentivise international Environmental, Social, Governance (ESG) standards and shipping decarbonisation.
The Poseidon Principles include:
- Assessment of climate alignment: Signatories will measure the carbon intensity of their shipping portfolios.
- Accountability: Signatories support and rely on the mandatory regulation established by the IMO for collecting data on fuel consumption from ships.
- Enforcement: Signatories commit to making compliance with the Poseidon Principles contractual in their new business activities.
- Transparency: Signatories are required to report and publish their portfolio alignment score on an annual basis.
Are you equipped with the right tools to measure the carbon emissions of your ship finance portfolio?
Pole Star’s vessel screening, monitoring, and compliance solution, PurpleTRAC, enables users to easily assess a vessel’s carbon output. By incorporating CarbonChain’s best-in-class GHG calculations, the solution ranks a vessel’s emission intensity within a peer group of similar ships, enabling users to report on the climate impact of a journey and provide the data required to meet their net-zero transition.
Click here to learn more about our partnership with CarbonChain.
How can a bank use this data?
- Identifying companies within the supply chain that use cleaner energy sources
- Favouring vessels that use Biofuels
- Purchasing carbon credits to reach their internal net zero goal and industry standards
- Using automated supply chain carbon accounting in their lending decisions
- Providing better financing terms to companies that employ more sustainable business practices
Click here to receive a demo and schedule your free PurpleTRAC trial.
