22 Jun 2021
In 2018, the International Maritime Organization (IMO) sought to contribute to the global fight against climate change by adopting an ambitious strategy to reduce Greenhouse Gas Emissions by ships. The initial target is for the shipping industry to reduce its emissions by 50% by 2050. While some have been quick to label this goal as “lofty” or “bold,” many have risen to the challenge including various financial institutions.
A few of the world's largest banking institutions have partnered with the Global Maritime Forum and changemakers in the shipping industry to develop the Poseidon Principles.
Named after the Greek God of the sea, the Poseidon Principles establish a global framework for assessing and disclosing whether a financial institution’s ship finance portfolio is in alignment with the goal of reducing carbon emissions. By making financial lending dependent on the IMO's strategy, the aim is to generate waves of change within the industry as ships are encouraged to become “greener.
Besides the clear benefits the principles bring to the shipping industry and the planet as a whole; lenders will undoubtedly benefit from this agreement as well. One of the biggest problems that many lenders face is what the industry termed as “stranded assets”. These are assets that have suffered from unanticipated or premature write-down or devaluation. With the introduction of this agreement, financial institutions will now need to ensure that they are investing in vessels that will not become redundant in a few years.
The Poseidon Principles are redefining the role of banks in the shipping sector with the 11 founding signatories being big names such as Citi, Amsterdam Trade Bank and Société General to name but a few. They create a clear path for the financial and shipping sectors to achieve significant progress in global decarbonisation.
There are four Poseidon Principles. Here is a closer look at each of them:
Principle 1: Assessment of Climate Alignment
Financial Institutions promise to “measure the carbon intensity and assess climate alignment of their shipping portfolio on an annual basis”. The Technical Guidance provided to Signatories ensures that they have various methods of assessing climate alignment. However, assessment is based on the IMO Global Data Collection System (IMO DCS) and standard decarbonisation trajectories that are produced by the Secretariat of the Poseidon Principles.
Principle 2: Accountability
The second principle ensures that signatories commit to solely depend on IMO DCS Data and service providers that have been approved by the IMO when calculating their shipping portfolio's climate alignment. The objective ensures that the information provided is accurate and fair, which will encourage trust in the Poseidon Principles.
Principle 3: Enforcement
Once data is submitted, it is then anonymised, and shipowners are not obligated to share data relating to their ships to any third party including financers. However, to help overcome this obstacle, financers are required to use “best efforts” to include in their new finance agreements which will require shipowners to disclose relevant data.
Furthermore, enforcement methods implemented through these Principles guarantee that the correct information from shipowners is provided to the financers, appropriate methods are used to share information and privacy policies are set up.
Principle 4: Transparency
Signatories are required to disclose their status as a member of the Poseidon Principles and are obligated to share the overall climate alignment of their shipping portfolio. The climate alignment score information is then shared with other signatories. However, this is not disclosed publicly.
Encouraging Greener Shipping
This ground-breaking initiative helps reimagine how the shipping industry operates but also how large financial institutions can contribute to helping mitigate climate change, especially in such a carbon-heavy sector.
As financial institutions start factoring climate change into their lending decisions, the objective is to encourage the shipping industry to embrace more environmentally friendly technologies. Thankfully, there are already a number of technologies that meet this specification and can aid vessels in reducing their environmental impact.
HullWiper is a great example of this as its safe and eco-friendly Remotely Operated Vehicle (ROV) collects and removes fouling from hulls while protecting the vessels’ coatings. Biofouling is the pesky marine “hitchhikers” which attach themselves to a ship's hull and are carried from one region to the next causing significant damage to local marine life. By utilising the HullWiper ROV, vessels can safely collect these invasive species without polluting port water. The unique onboard filter system ensures that clean water is released back into the ocean while hull waste and debris are disposed of on-shore in an eco-friendly manner through a locally approved environmental waste disposal company.
For more information contact the HullWiper team via [email protected] and find out what we can do for your fleet. Visit our website here: www.hullwiper.co.