Shipping industry faces ESG heat from lenders


View of shipping containers stacked at Southampton Docks, Southampton, Great Britain, October 18, 2021. Photo taken with a drone. REUTERS / Matthew Childs

LONDON, Oct. 19 (Reuters) – Banks are demanding much stricter environmental criteria when financing shipping companies as investor pressure increases on the industry to accelerate the green shift, according to Boston Consulting Group (BCG).

Shipping, which carries around 90% of global trade, accounts for nearly 3% of global CO2 emissions and BCG predicts that the industry will need $ 2.4 trillion to reach net zero emissions by 2050.

“ESG demands are already spurring more action from banks. Shipping is already feeling it and they (the shipping companies) are now under pressure,” said Peter Jameson, partner of BCG, who are consultants for the UN COP26 climate summit starting October 31.

Standard Chartered (STAN.L) has already provided loans linked to sustainability goals for the Odfjell drilling group and the maritime division of the Omani group Asyad, the bank said.

“When considering lending on new assets, banks will create a bigger channel for CO2 reductions through their policies,” Jameson told Reuters.

“Banks are also finding that insurance companies are feeling pressure from shareholders, which is also leading to a revaluation of large pension funds.”

Major maritime finance financiers currently provide nearly $ 300 billion in loans to the industry each year, analysts say.

Of the $ 2.4 trillion that BCG estimates will be needed to achieve net zero emissions by 2050, Jameson said $ 500 billion will be needed by 2030, with the remaining $ 1.9 trillion between 2030 and 2050.

Most of the total amount – around $ 1.7 trillion – would go to developing future fuels.

“Funding sources are already available, but many more are still needed,” Jameson said.

ESG-related assets under management are expected to represent up to 80% of total shipping lending by 2030, the BCG said.

The United Nations maritime agency, the International Maritime Organization (IMO), has said it aims to reduce overall greenhouse gas (GHG) emissions from ships by 50% from 2008 levels of by 2050, but industry groups are calling for more progress from governments.

“The risks to the balance sheets will start to force more questions to be asked of the IMO,” said Ulrik Sanders, BCG director general, adding that this “would provide more incentive to act in favor of decarbonization”.

Editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.


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