Build a Poseidon Principles Institute to drive investment skill

Today, 60% of the finance being supplied to the shipping industry comes from banks that are signed up to the Poseidon Principles- a global framework for responsible ship finance,

In essence, the principles set a benchmark for assessing and disclosing the climate impact of the shipping portfolios managed by the major global trade finance banks.

Financial institutions moved to get ahead of impending¬†regulations by¬†launching the Poseidon¬†Principles in 2019.¬†Many of¬†the major¬†banks involved in¬†maritime are based¬†in Europe and are subject to the European Union’s¬†Sustainable Finance Action Plan,¬†comprising¬†10 key points adopted¬†by¬†the¬†European¬†Commission¬†to¬†leverage¬†financial¬†markets in order to¬†address¬†sustainability¬†challenges.

With the EU’s Sustainable Finance Disclosure Regulation (SFDR)¬†already¬†made¬†public,¬†the¬†asset¬†managers¬†of financial institutions¬†are preparing¬†to implement these regulatory standards,¬†which will¬†come into¬†effect in 2023. These¬†standards¬†will¬†soon¬†require¬†maritime¬†companies¬†to disclose¬†more¬†information¬†on¬†their¬†environmental,¬†social and corporate¬†governance (ESG)¬†credentials.

In¬†fact,¬†some¬†financial institutions in Europe¬†are determining favourable versus punitive capital treatment based¬†on a¬†company’s¬†ESG credentials,¬†with¬†some banks considering discontinuing treasury relationships with corporates from unsustainable industries.

So, what are the incentives for the maritime industry to go green? Ultimately, regulation will drive changes in business practices, but would it not be better if we adopted a carrot approach to accompany the stick?

A¬†billion¬†dollars¬†is¬†not¬†enough¬†to¬†solve¬†the¬†big-industry¬†issues¬†such¬†as¬†investment¬†in alternative¬†‘greener’¬†fuels, but could¬†this¬†cash¬†be¬†put¬†to¬†good¬†use¬†to¬†inform¬†and¬†educate chief¬†financial¬†officers¬†and¬†treasurers¬†in¬†the maritime¬†industry¬†so¬†they¬†fully¬†understand the¬†longer-term¬†benefits of¬†decarbonization and¬†adopting a¬†sustainable business model?

Companies which do not get onboard quickly enough will be left behind and find their access to the financial markets severely limited. Their working capital and borrowing will become more expensive as banks embed ESG metrics into their risk assessments.

More needs¬†to be¬†done to¬†encourage,¬†educate¬†and inform the financial¬†decision makers in maritime. The billion-dollar¬†Poseidon Principles Institute will¬†enable these individuals to understand that turning¬†green equals longevity –¬†and¬†the¬†sooner they embark on the sustainability journey, the more competitive they will become.

THE $1BN QUESTION: This article is part of a series written by people across shipping in responsive to this question about how to deploy a hypothetical Tradewinds Sustainable Shipping Fund:
How, where and why would you sustainable shipping, as the industry grapples with the need to cut carbon emissions,improve efficiency and keep cargoes moving in a world facing multiple economic and political challenges?The investment will be made now and ideally held for the next seven years to the end of the decade. As an added bonus, give one policy or regulation you would like to implement from 1 January 2023 to benefit shipping?