Banks demand much stricter environmental criteria for shipping firms

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Banks demand much stricter environmental criteria for shipping firms

LONDON Reuters - Banks are demanding much stricter environmental criteria when financing shipping companies as investor pressure grows on the sector to accelerate going greener, according to BCG Shipping, which transports about 90% of world trade, accounts for nearly 3% of the world's CO 2 emissions and BCG forecast the industry will need $2.4 trillion to achieve net zero emissions by 2050.

ESG-driven requests are already prompting more action from banks. Shipping is already feeling it and they now shipping companies are under pressure, said Peter Jameson, partner with BCG, which are consultants for the COP 26 UN Climate Summit that starts on Oct. 31.

Standard Chartered has already provided loans linked to sustainability targets for drilling group Odfjell and the transportation division of Oman's Asyad Group, the bank has said.

When looking for lending on new assets, banks will create a bigger conduit for CO 2 reductions through their policies, Jameson told Reuters.

The banks are also seeing the big pension funds feeling shareholder pressure and this is also causing huge pension funds to reassess. Leading shipping financiers provide roughly $300 billion of financing annually to the industry, analysts estimate.

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

The bulk of the total amount is $1.7 trillion to be invested towards developing future fuels.

Funding sources are already available, yet plenty more are still required, Jameson said.

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

Global Shipping Agency the International Maritime Organization IMO has said it aims to reduce GHG emissions from ships by 50% from 2008 levels by 2050, but industry groups are calling for more progress from governments.

The risks to the balance sheets would force more questions being asked to the IMO, said Ulrik Sanders, managing director at BCG, adding that this would prompt more action towards decarbonisation.