Ship finance lenders make headway on emission targets

The 34 banking signatories to the Poseidon Principles, representing a loan portfolio to global shipping of about $240 billion, have reported a joint improvement in emissions reduction scores in 2023 based on initial IMO targets.

In its fourth annual report, the framework for measuring and reporting the alignment of lenders’ shipping portfolios with climate goals showed a considerable boost, with an average score of 2% above the trajectory of IMO’s initial ambition of a 50% CO2 reduction by 2050 and a notable advancement from last year’s 9.7%.

The results encompassed the climate alignment scores of 30 signatories based on data from 2022, an increase of two signatories over last year’s report. The four signatories who joined in 2023 were not required to disclose information.

The results show that 11 portfolios were aligned with the initial CO2 reduction trajectory, representing over a third of all signatories, up from a quarter last year.

Signatories’ scores against the trajectory ranged from 13.5% below to 18.5% above, with 63% reporting a score of 5% above or less, which Poseidon Principles said marked “yet another considerable improvement” from the previous year’s range of 12.5% below to 57.3% above, with 50% reporting a score of 5% above or less.

The simple average proportion of activity reported across the 30 signatories was 95.4%. Five signatories reported 100% of their activities, up from three of the 28 signatories who reported last year. All signatories reported at least 70% of their activities, with 26 reporting more than 90% of their portfolio. This number, again, has considerably improved from last year, when 19 of 28 signatories reported more than 90% of their portfolio.

In September 2023, signatories decided unanimously to fully adopt the IMO’s revised GHG strategy into the Poseidon Principles methodology, despite some remaining uncertainties. This decision also accounts for emission reduction milestones in 2030 and 2040, employing a comprehensive lifecycle well-to-wake approach and broadening coverage to include a more extensive range of greenhouse gas emissions.

The 2023 annual disclosure report was produced by the Global Maritime Forum, which performs secretariat services for the Poseidon Principles, with expert support provided by UMAS. The upcoming year will see the Poseidon Principles fine-tune trajectories and methodologies, building on the lessons learned from the current report and outcome of MEPC 81.