Climate Change

Banks launch green charter to help shipping reduce its carbon footprint

Children play in the sea at New Brighton as the Maersk Line container ship Maersk Sentosa is helped by tugs as it navigates the River Mersey in Liverpool, Britain, July 31, 2018. REUTERS/Phil Noble

Navigating a way to lower emissions Image: REUTERS/Phil Noble

Michael Parker
Global Industry Head of Shipping & Logistics, Citi
Johannah Christensen
Managing Director, Global Maritime Forum
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Climate Change?
The Big Picture
Explore and monitor how Climate Change is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Climate Change

Around 90% of global trade by volume is carried by ships - making the maritime industry a vital player in economic growth, but at a cost. If it were a country, shipping would equal Germany for greenhouse gas (GHG) emissions.

The Intergovernmental Panel on Climate Change says limiting global warming to 1.5°C "would require rapid, far-reaching and unprecedented changes in all aspects of society" and a failure to do so "would include a dramatic rise in sea levels, extreme weather and damage to the ecosystem which together could be irreversible if emissions are allowed to grow in an uncontrolled and unaccountable way.”

Image: International Chamber of Shipping

Given trade growth, the maritime industry must play its part in the global transition towards a low-carbon economy. This is what led Citi, DNB and Société Générale to work with the Global Maritime Forum, Rocky Mountain Institute, University College London and shipping industry leaders to develop the Poseidon Principles – the world’s first global sector-specific and self-governing climate alignment agreement among financial institutions.

Founding signatories include Citi, DNB, Société Générale, ABN Amro, Crédit Agricole CIB, Danish Ship Finance, Danske Bank, DVB, ING and Nordea. Together they represent a bank loan portfolio to global shipping of approximately $100 billion – around 20% of the global ship finance portfolio. Signatories will integrate climate considerations into lending decisions with the objective to incentivize shipping’s decarbonization. We expect many more banks to join in the near future.

The Poseidon Principles provide banks with an industry-specific methodology for assessing and disclosing the climate impact of their shipping portfolios. They are supportive of the goal set by the International Maritime Organization (IMO), a UN agency responsible for regulating shipping globally, to reduce its total annual GHG emissions by at least 50% by 2050 compared with 2008 levels.

The four key points in the Poseidon Principles are:

1) Assessment of climate alignment

Signatories will measure the carbon intensity and assess the climate alignment (relative to established decarbonization trajectories) of their shipping portfolios on an annual basis

2) Accountability

Signatories will only use data types, sources, standards and service providers established by the IMO

3) Enforcement

Signatories will work with clients and partners to standardize covenant clauses into contracts to ensure access to high-quality data

4) Transparency

Signatories will publicly acknowledge their signatory status, and portfolio climate alignment scores will be published annually

These Principles apply to lenders, relevant lessors and financial guarantors including export credit agencies. They must be applied by all signatories in all business activities that are credit secured by vessel mortgages or finance leases secured by title over vessel, and where a vessel or vessels fall under the purview of the IMO.

The Poseidon Principles have been created to improve the role of maritime finance in addressing global environmental issues. Working with other climate-focused commitments and organizations such as the Task Force on Climate Related Financial Disclosures (TCFD), the Principles for Responsible Banking, CDP (formerly the Carbon Disclosure Project) and the Energy Transitions Commission, they establish a common baseline that provides a standard for banks to work towards their sustainability goals.

As the Poseidon Principles begin to play a larger role in maritime finance, collaborations and alignment will prove crucial in the transition to a low-carbon economy. The Poseidon Principles are designed to expand to include other important issues such as recycling and scrapping of vessels and other areas where the collective influence of the signatories can help improve the contribution the industry and its lenders can make to society.

The establishment of the Principles is intended to be the first step of a partnership between the industry and its lenders to get fair recognition of what the industry contributes to the global economy, so that the finance needed to accelerate shipping’s decarbonization is positively promoted.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Climate ChangeFinancial and Monetary Systems
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Two years to save the planet, says UN climate chief, and other nature and climate stories you need to read this week

Johnny Wood

April 15, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum