Shipping industry faces ESG heat from lenders By Reuters
LONDON (Reuters), Banks have increased the stringency of environmental requirements for shipping company financing, as investors pressure this sector to become more environmentally friendly. Boston Consulting Group (BCG) reports.
Shipment, which accounts for almost 3% of global CO2 emissions, transports 90% of all world trade. BCG predicts that shipping will require $2.4 trillion in order to reach net zero emissions by 2050.
Banks are taking more steps to address ESG-driven requests. It is already felt by shipping and the companies that ship are feeling it,” Peter Jameson from BCG (consultants for the COP26 UN Climate Summit, Oct. 31) said.
Standard Chartered (OTC:), has provided loans to support sustainability targets for Odfjell’s drilling company and Oman’s Asyad Group’s shipping unit, according to the bank.
Jameson said that when banks lend to new assets they will be creating a larger conduit for CO2 reductions via their policies.
“The banks also see insurance companies feel shareholder pressure, which is also making it difficult for large pension funds to reassess.”
Analysts estimate that the shipping industry receives close to $300 billion in loans annually from leading financiers.
Jameson estimated that $2.4 trillion is required to attain net-zero emission by 2050. He also suggested $500 billion between the present and 2030. And the rest $1.9 trillion between 2030-2050.
The bulk of the total amount – around $1.7 trillion – would go towards developing future fuels.
Jameson explained that while funding sources are becoming more available, many are still required.
BCG estimates that ESG assets under management will account for up to 80% in total shipping lending by 2030.
The International Maritime Organization, a UN-affiliated shipping agency (IMO), has stated that it aims at reducing overall greenhouse gas (GHGs) emissions by ships by half of 2008 levels by 2050. However, industry groups call for greater government support.
Ulrik Sanders (managing director, BCG), stated that “the risks to balance sheets” will force the IMO to ask more questions and would prompt “more action toward decarbonization”.
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