The Poseidon Principles provide a framework for integrating climate considerations into lending decisions, in order to promote international shipping´s decarbonization. The organization is headquartered in Copenhagen, Denmark. 30 banks have committed to the Poseidon Principles. They set a benchmark for what it means to be a responsible provider of bank services to the maritime sector.
The members of the Poseidon Principles account for 2/3 of the world´s ship finance portfolio. Maritime Carbon Solutions has been talking to one of the member banks, SpareBank 1 SR-Bank, which is a leading Norwegian financial institution. It is headquartered in Stavanger, the oil-and energy capital of Norway.
“One of the best features of the Poseidon Principles, is that they are so specific. That makes it a lot easier for both banks and shipowners, to relate to the reporting. In addition, transparency is an important principle of the Poseidon-reporting”, says Britta Lima Erga, Senior Client Adviser, Energy and Maritime Industries.
“When we first started with the reporting, our clients found it both time-consuming and a hassle. But now, when they have got used to it, the shipping companies have a solid perception of the the rationale behind the reports. It adds some value to them as well” she says.
Among the data that have to be reported, we find distance travelled, fuel consumption and the Annual Efficiency Ratio (AER). The AER affirms the ship´s CO2-emission per tonnage-mile.
Lima Erga stresses that it is not mandatory for the clients to report on the Poseidon-data. However, failure to do so may make it more difficult to get funding in the future.
“We want clients who are innovative, updated, responsible and committed to sustainability. We think these companies will have the best chances of success in the long run, and thus reduce our risk of financial loss”, Lima Erga says.
The Poseidon Principles contribute to a closer relationship between the bank and the clients, according to Lima Erga.
“We get a better understanding of which parameters that influence their results. In addition, we have gained huge insight and respect for the complexity of operating long distance vessels. One cannot just switch over to batteries and el-engines, as one can do on ferries or other short distance vessels.”
Erga points out that another advantage with the Poseidon Principles is the way we communicate our strategy on sustainability to external stakeholders. A result of the Poseidon-reporting being so specific and detailed, is that it gives the member-banks a lot more credibility, compared to just writing a loose statement saying, ‘we will be working for reducing the emissions in the shipping industry’.
An extra reward for the clients is that they may be eligible for so called Sustainability Linked Loans from their bank. The bank and the client identify 1-3 KPI´s for the vessel owner to improve. If these KPI´s are achieved on a yearly basis, the borrowing margin may be reduced by some 5-10 basis points.
“Even though it´s an incentive to get reduced borrowing costs, we observe that is equally important to the clients to show in their reports that they have such arrangements” Erga says.
Finally, Lima Erga points out that the Poseidon Principles are not static.
“The emission goals will most likely be higher in the years to follow. As of today, there are no zero-emission fuels available in the market. I have an optimistic view that the solutions will come. New and environmentally friendly vessels will be phased in. But at the same time it is important to take good care of the existing fleet. It is good for the environment to keep a ship running over many years, given that it is provided with the necessary upgrades and maintenance”.