Subscribe | Log In

Related

Transition-Linked Bonds For Shipping

Share post:

Stockholm (NordSIP) – The shipping industry is one of the most important sectors for the energy transition. On the one hand, estimates suggest the industry is only responsible for 2% to 3% of global annual emissions. At the same time, a 2020 survey conducted by the Transition Pathways Initiative (TPI) suggests that 56.25% of international shipping companies are among the transportation sector’s players least engaged in tackling climate change.

Nevertheless, the industry is crucial for international trade and a sector the modern world cannot do without. To the extent that they can play a role in the energy transition, some shipping companies have started addressing these concerns. In the second half of 2021, A.P. Moller – Maersk, the world’s largest shipping company, announced it would introduce the first in a series of 8 large ocean-going container vessels capable of being operated on carbon-neutral methanol in the first quarter of 2024.

Investors can also aid the shipping industry on its journey by incentivising the market in the right direction. Danske Bank’s new guidelines for the shipping companies issuing transition-linked bond are an example of how this can be done.

“We are working, as a leading Nordic bank and with the resources we have at our disposal, constantly to create sustainable solutions that can help solve the global climate challenges. Therefore, it is a major step in the right direction that we are now launching a Nordic cooperation to create common guidelines for the transitional financing of the shipping industry,” says Mikko Tapio Eloranta, Head of Sustainable Finance Nordic at Danske Bank.

The guidelines are developed by Danske Bank in partnership with industry participants under the Green Shipping Programme, a public-private partnership, that aims to advance the Norwegian government’s maritime strategies and plans.

According to the guidelines, shipping companies borrowing funds through transition-linked bonds or transition-linked loans should report performance on selected KPIs for decarbonisation and alignment with the EU Taxonomy.
GHG emissions should be used as a proxy of decarbonisation, with Danske Bank suggesting the use of Annual Efficiency Ratio (AER) and be aligned with a target of zero GHG emissions in 2050, as per the Climate Bond Initiative and the Poseidon Principles.
For alignment with EU Taxonomy, borrowers focus on the ‘Do No Significant Harm’ (DNSH) criteria of the EU Taxonomy, specifically unregulated elements such underwater noise, biofouling, and ship recycling.
Image courtesy of dendoktoor via Pixabay

From the Author

Recommended Articles