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Banks warn against shutting out shipping from green financing

DNB and Standard Chartered bank see activities outside currently approved ‘green’ criteria as important to the green transition

With an important part of shipping assets and activities unlikely to meet new green financing criteria, industry financiers warn against abandoning them as they will be necessary to enable the zero emissions transition

SHIPPING lenders say activities and assets that fall short of new “green” investing criteria should not be overlooked, as they will power the industry’s emissions transition.

The European Union has developed a sustainable finance taxonomy regulation, which establishes a classification system for economic activities that can be considered as green for investment purposes, with the ultimate purpose of aiming capital in that direction.

It also imposes reporting and financial disclosure requirements for items and activities that are aligned with the taxonomy.

Nina Ahlstrand, head of sustainable finance at Norway’s DNB, said the EU taxonomy was among the issues at top of the bank’s agenda.

At present, the taxonomy does not cover shipping. Ms Ahlstrand told a Marine Money virtual panel that she expects rules criteria for the shipping industry to come in in 2021.

Current taxonomy prescriptions for the transport sector exclude transport or storage activities that are dedicated to fossil fuels.

If that were applied to shipping in the same manner it would likely mean that major segments like bulkers and tankers would be excluded.

Ms Ahlstrand said that exclusion from the EU taxonomy should not necessarily mean that an asset or activity is “brown” or does not have a role to play in the green transition.

“I would also expect that there is a fairly limited share of the investable universe that will actually qualify, in line with the taxonomy, and we cannot see this as a way of only investing in what is already green and taxonomy aligned. It remains very important to invest in the transition,” she said.

Amit Puri, global head for environmental and social risk management at Standard Chartered Bank, said the bank was committed to invest in the transition across the carbon intensity sectors in its portfolio.

Like Ahlstrand, Mr Puri sees a core base in those operations that would fall outside of the EU taxonomy.

“There are a lot of activities that fall outside of the taxonomy that are crying out for capital,” he said.

Standard Chartered Bank has a huge appetite to finance the transition in emerging markets, which also means financing more efficient ships and new fuel adoption, according to Mr Puri.

But it also needs to see a proven track record before it invests.

“That is where you see some tension effectively in the system where we want to do it but the technology is nascent in some ways, it is not proven, we are not sure what the cost and return and capital is likely to look like,” he explained.

Ms Ahlstrand acknowledged that it would be a communication challenge to demonstrate that an activity not meeting the EU taxonomy criteria was still worth investing in.

“It is fairly tricky to view it as a binary topic of either you are green or you are not. There are different shades when it comes to this discussion,” she said.

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