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The Poseidon Ideas Affiliation, a gaggle of main marine transport banks, launched its first Annual Disclosure Report in December 2020. This report discloses the “local weather alignment rating” of fifteen banks’ ship finance portfolios, and indicators the rising significance of sustainability disclosure, local weather change mitigation and vitality transition issues in marine finance.
The Poseidon Ideas are a marine transport sector-specific framework for banks to quantify and disclose greenhouse gasoline (GHG) emissions. Banks and different transport trade stakeholders established the Poseidon Ideas in 2019 to evaluate ship finance portfolio alignment with the Worldwide Maritime Group’s (IMO) GHG emissions discount targets. The IMO’s “Initial GHG Strategy” requires lowering complete GHG emissions attributable to the worldwide marine transport sector by at the very least 50% by 2050 in comparison with 2008.
The Poseidon Ideas consists of standardized strategies for taking part monetary establishments to calculate and report on their actions’ alignment with the IMO’s Preliminary GHG Technique. The Poseidon Ideas don’t require that taking part banks scale back GHG emissions from their transport portfolios. As a substitute, the Poseidon Ideas require taking part banks to yearly measure and report the general “local weather alignment” of their transport portfolios. Collaborating banks should apply the Poseidon Ideas in loans secured by title over vessels that fall below the purview of the IMO (i.e., vessels 5,000 gross tonnage and above engaged in worldwide commerce). By means of standardized covenants in credit score agreements, banks require debtors to offer the banks with the knowledge the banks have to conduct the “local weather alignment” measurement and reporting that banks should do to adjust to the Poseidon Ideas.
The Poseidon Ideas Affiliation Annual Disclosure Report 2020, launched in December 2020, is the primary time taking part monetary establishments have publicly disclosed this “local weather alignment”. Within the report, fifteen banks, most of which grew to become taking part establishments in 2019, disclose the “local weather alignment” of their portfolios for 2019.
The report assigns a “local weather alignment” rating to every financial institution’s portfolio. A “local weather alignment” rating of 0% represents a lending portfolio that’s “according to the decarbonization trajectory threshold” or “local weather aligned.” A unfavourable rating signifies a lending portfolio’s “carbon depth is decrease than required by the decarbonization trajectory” or “local weather misaligned.” The common rating was +1.2%, with scores starting from -44.92% to +32%. In accordance with these scores, the portfolios of three banks are aligned with the IMO’s Preliminary GHG Technique, whereas the portfolios of the remaining reporting taking part establishments usually are not.
The report additionally consists of commentary from banks on key takeaways from their local weather evaluation, and reflections on the way it will inform their enterprise actions and decision-making sooner or later. The Poseidon Ideas Affiliation states within the Annual Disclosure Report 2020 that “this primary local weather evaluation reporting gives Signatory monetary establishments with a novel understanding of their ship finance portfolios’ local weather footprint, and it permits monetary establishments below the Poseidon Ideas to work proactively with their transport shoppers and different essential stakeholders to form a greater future for worldwide transport and society.” The commentary from taking part banks consists of notable statements concerning monetary establishments’ commitments to decarbonization efforts, the affect of sustainability parameters on lending selections, how banks wish to contribute to the worldwide effort to deal with local weather change, and the way the Poseidon Ideas will proceed to influence choice making for financings.
A copy of the Annual Disclosure Report 2020 can be found here.
1 “Local weather alignment” is outlined because the diploma to which a vessel, product, or portfolio’s carbon depth is according to a decarbonization trajectory that meets the IMO ambition of lowering complete annual GHG emissions by at the very least 50% by 2050 primarily based on 2008 ranges. The Poseidon Ideas depend on the Annual Effectivity Ratio as a carbon depth metric. The Annual Effectivity Ratio makes use of the parameters of gas consumption, distance travelled, and deadweight tonnage at summer time draught. A decarbonization trajectory is a illustration of what number of grams of carbon dioxide a single ship can emit to maneuver one tonne of products one nautical mile over a time horizon. Customary decarbonization trajectories are produced by the Secretariat of the Poseidon Ideas for every ship kind and measurement class. To evaluate local weather alignment of a single vessel, the vessel’s annual carbon depth is in contrast with the decarbonization trajectory for its ship kind and measurement class. The local weather alignment of a lending product or portfolio is a weighted common of the vessel carbon intensities in every product or portfolio.
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