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Big banks set new lending standards for the shipping industry to reduce CO2 emissions

The Cosco Spain container ship, operated by Cosco Shipping Holdings Co., is sailing near the Yangshan deepwater port, operated by the Shanghai International Port Group (SIPG), on this aerial photograph taken in Shanghai, China on Friday, May 10, 2019.

Qilai Shen | Bloomberg | Getty Images

Eleven banks that lend to shipping companies announced Monday that the impact on climate would be integrated into the criteria that determine the amount of borrowing of transport companies, an effort that, according to banks, will significantly reduce CO2 emissions from the industry.

Banks will set their new lending standards around the 2018 climate commitment of the International Maritime Organization, which aims to reduce CO2 emissions by at least 50% from 2008 levels of Here 2050 and reduce each ship's emissions by 40% from 2008 levels by 2030.

"We are alerting banks about the impact of climate change in their portfolios," said Michael Parker, Global Head of Shipping at Citigroup.

"We are now making climate change decisions to help the industry make the transition to the technology needed to design ships, reduce emissions and decarbonize the sector."

This is the first time that global banks have collectively incorporated a climate alignment strategy into their financial decisions.

Maritime transport accounts for 2.2% of global carbon dioxide emissions, according to IMO, a US agency that regulates pollution from ships.

The lending framework, called the "Poseidon Principles", will assess and indicate whether lending portfolios of financial institutions are in line with the IMO climate objectives adopted in 2018.

The shipping industry avoided specific emissions reduction targets in the 2015 Paris climate agreement, while 195 countries were committed to reducing their greenhouse gas emissions. greenhouse to limit the rise in global average temperature to less than 2 degrees Celsius.

Together, the 11 banks account for about 20%, or about $ 100 billion, of the global ship finance portfolio. The banks involved are Citi, Societe Generale, DNB, Danish Ship Finance, Danske Bank and the Norwegian DVB. New signatories are expected after the official launch in a few months, Parker said.

James Mitchell, Marine Finance Officer at the Rocky Mountain Institute, said the new standards will "redefine" the role of banks in the shipping industry and encourage financial institutions to do the same in other sectors.

"[The Poseidon Principles] are the first global, sectoral and autonomous global climate-change agreement between financial institutions, "said Mr. Mitchell.The importance of this agreement can not be underestimated."

The marine sector will require more vessels to transport goods over the next few decades, Parker said, noting that the new lending standards would help make these extra ships cleaner and more efficient.

"We know it will become increasingly difficult, and the challenge is to transition and help the industry find alternative fuels to encourage people to invest in new ships and new technologies," he said. Parker.

"We will help make lending decisions and investment decisions much less speculative and more focused on the environmental consequences of this investment," he said.

Last year, the IMO also introduced additional climate regulation that will reduce sulfur emissions from the world's ships by 2020. Petroleum producers, fuel sellers and transport companies OPEC has expressed the fear that these new rules will make the oil market more unstable and adversely affect vessels that are not equipped to reduce sulfur emissions or pay premiums for cleaner fuel within the required time.

Mitchell said that IMO will launch more climate-related policies in the coming years, as shipping banks and shipping companies move to cleaner energy and technology.

"It does not happen in a vacuum," said Mitchell. "In addition, the IMO has adopted other policies that will bring more difficult aspects of decarbonization."

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