Banks Raise Decarbonization Benchmark Standard in Poseidon Principles

Poseidon Principles raise benchmarking standards
Benchmarking and reporting of financial portfolios will be expanded to include alignment with the UN’s 1.5 degree targets

Published 09/22/2022 16:23 by

The Maritime Executive

The leading banks that finance the shipping industry and shipping insurers participating in the Poseidon Principals initiative have agreed to raise the standards by which they measure climate alignment in the shipping industry. They pledge to align the Poseidon Principles with the United Nations’ ambitions, and the latest available climate science comes as the organization has also announced its thirtieth financial institution as a signatory to the pledge, meaning it now accounts for more than 65 percent of the global ship finance portfolio includes.

The financial institutions and ship insurers that have signed the Poseidon Principles have committed to measuring and reporting on the alignment of the institutions’ shipping portfolios and ship insurers’ hull and machinery portfolios with the climate targets. The Principles build on a framework that includes assessment of climate alignment, accountability, enforcement and transparency. Announced in 2019, the initiative has begun printing annual reports measuring compliance with the International Maritime Organization’s goal of reducing greenhouse gas emissions from international shipping by at least 50 percent by 2050, with a 100 percent reduction by 2050.

“The urgency is clear,” said Michael Parker, chairman, Global Shipping, Logistics & Offshore, Citi and chairman of the Poseidon Principles for Financial Institutions. “Because of the role that shipping plays in the global economy, we need to accelerate our ambition to reach the 1.5 degree temperature target of the Paris Agreement. This new goal will allow the Poseidon Principles to continue to play our role in promoting and supporting the decarbonization of shipping.”

Under the new commitment, the 30 shipping banks and 16 marine insurance providers and brokers participating in the Poseidon Principles will add additional trajectories to achieve a net-zero climate bias by 2050 and a maximum temperature rise of 1.5°C above sea level to report pre-industrial levels by 2050 2100 to meet the Paris Agreement temperature targets. In order for the second trajectory to be consistent with a 1.5°C future, the scope is extended to include all greenhouse gas types and to account for well-to-wake emissions. This new commitment will be included in the measurements once a new course is set based on credible and recognized sources.

Even before the tightening of benchmarking, the Poseidon Principles have become increasingly relevant in the industry’s financing and insurance efforts, providing a framework to promote the decarbonisation of shipping by incorporating climate considerations into lending decisions. Today, KfW IPEX-Bank, a leading player in the German export credit market, is the latest financial institution to join the initiative.

Michael Parker pointed out that attendees represent approximately two-thirds of the global marine finance portfolio. As participation increases, shipping companies need to be able to demonstrate their efforts to align with decarbonization goals in order to access finance to sustain and scale up their operations. Parker notes that they aim to promote environmental stewardship throughout the maritime value chain.

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