March 24, 2021
Another major lending institute has joined Poseidon Principles. MUFG Bank has become the latest signatory on a growing list of finance firms making a concerted effort to lend sustainably. The Japanese banking giant joins four other major Japanese financial institutes that have already declared their support for the initiative. This includes Shinsei Bank Limited, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Finance & Leasing and Sumitomo Mitsui Trust Bank. Since its launch in 2019, a total of 24 banks have pledged their commitment to Poseidon Principles. That equates to approximately USD 175 billion in shipping loans or nearly half of the industry’s lending portfolio.
Notably absent from the initiative are Chinese financial institutions. Over the last few years, China has invested billions into the shipping sector. Chinese banks now account for about a quarter of all ship loans yet not one has pledged their support to Poseidon Principles. That is a major loss. Poseidon Principles is an ideal collaboration between industry leaders. It encourages banks to play an active part in sustainable solutions as opposed to being inactive bystanders. As part of Poseidon Principles, banks that finance vessels aligning with decarbonization initiatives receive better scores. This makes lending institutions more accountable for their decisions, but at the same time, it incentivizes ship owners to finance eco-friendly ships. Findings from Poseidon Principles’ first-ever disclosure report showed that of fifteen reporting signatories, only three are meeting UN decarbonization targets. The results are no doubt disappointing, but they provide a priceless insight as to just how much work there is ahead.
Moving forward, Poseidon Principles could play a key role in reaching decarbonization goals. Nurturing responsible lending, all while fostering collaborative efforts between industry players is truly invaluable to success in sustainable shipping. Chinese lenders should take note or risk losing a competitive edge. Other financial firms have made it clear that they are going to be part of the solution, not the problem.
Five Japanese lenders are now part of Poseidon Principles (shippingwatch.com) by Trine Vestergaard
15 financial institutions disclose the climate alignment of their ship finance portfolios – Poseidon Principles