JUST seven of the 28 banks committed to disclosing the alignment of their portfolios against the existing global climate targets for shipping are on track.

The annual disclosure of Poseidon Principles data, which measures signatories’ portfolio-wide emissions against the International Maritime Organization’s ambition of reducing greenhouse gas emissions from international shipping by at least 50% by 2050, revealed that the banks’ alignment scores were worse than the year before.

The average score was 9.7% above the alignment trajectory in 2021, up from 7% a year earlier.

The scores were partly a reflection of the continuing impact of Covid during 2021, where supply chain congestion and a slow recovery in the cruiseship sector dragged down scores for several banks.

But the misalignment of banks against the targets are also simply a reflection of the length of time the transition to lower emissions will take before progress is reflected in in these annual scores.

 “We are on a multi-year journey,” said Michael Parker, chairman of global shipping, logistics and offshore at Citi, and chair of the Poseidon Principles.

“Ships have a 20+ year lifecycle. It will take time for this trend to be reflected in our portfolios, even with the banks favouring low-carbon projects”.

The current misalignment of scores against the IMO’s existing 50% emissions cuts by 2050 goals is only set to grow next year when climate targets are due to significantly increased.

In September 2022, Poseidon Principles’ signatories committed to aligning the framework with the ambition of the Paris Agreement to limit global temperature rises to 1.5°C above pre-industrial levels by 2100.

The detail of the trajectories is not yet approved, but both the current IMO-aligned trajectory and a Paris-aligned trajectory are set to be used as benchmarks next year.

Signatories have also committed to evaluating the current trajectory following the expected adoption of the Revised IMO GHG Strategy at MEPC 80 in July 2023, including raising its levels of ambition.

While the annual disclosure of banks climate data reveals the gulf between current emissions and climate targets, the Poseidon Principles have pioneered a level of reporting transparency not yet matched elsewhere in the industry.

Just 12 companies out of more than 18,700 worldwide merited a “triple A” score for their environmental disclosures in 2022, according to the latest report from the Carbon Disclosure Project, a voluntary disclosure system widely used by large investors.

This was even fewer than the 14 companies identified the previous year and shipping companies barely featured on the list at all. Japanese owners K Line and NYK were the only maritime businesses listed in this year’s results.

The paucity of transparent disclosure is not isolated to shipping - many companies featured on the CDP list are struggling to meet the requests for more information as regulators and investors demand improvements in environmental reporting and disclosure standards.

The requirements to disclose data, however, is increasingly going to be demanded from cargo interests and finance providers.

The Science Based Targets initiative (SBTi) last month launched its long-awaited trajectory for shipping, described as a “gold standard” for certifying companies’ decarbonisation targets.

The non-profit programme, which is a partner of CDP, has so far only seen seven shipping companies sign up with only near-term commitments, according to the SBTi database.

More, however, are expected to follow as companies seek to validate their green credentials against charges of widespread “greenwashing”.

Having set up a high-level expert group at last year’s COP26 in Glasgow to examine the integrity of net-zero commitments being made by businesses, financial institutions and governments, UN secretary-general António Guterres last month unveiled the findings of a UN high level expert.

The influential report contained measures targeting “weak” net zero pledges and while the recommendations are non-binding, the report is effectively a UN-backed recommendation for verification programmes like the SBTi.

The expectation is that the SBTi will be used by several existing shipping programmes, possibly including the Poseidon Principles, to tighten the requirements and increase verifiable transparency of emissions reductions.

The lack of transparency or substance being attached to announcements has become a consistent theme at national and international climate meetings and the subject of increasing scrutiny from environmental non-governmental organisations.

One report, issued by the Dutch-based non-profit World Benchmarking Alliance, last month pointed out that a “significant proportion” of the 17 shipping companies it assessed for their climate policies lacked depth, detail and credible intermediate targets. That, the report argued, “called into question the credibility of many of the shipping companies’ decarbonisation targets”.

Just four out of the 90 transport companies assessed have 1.5°C targets validated by the SBTi.

The overall significance of these new targets is that is it will increasingly leave no room for corporate entities to hide behind misleading emissions reports or empty pledges.

“It means that analysts who support shareholders will be scrutinising any corporates or anyone else who is making a statement using those criteria and it will be much harder for corporates not to align with that — in short it will drive a lot more business towards the 1.5°C pathway,” explained maritime climate data expert Tristan Smith.

By committing to transparency, the Poseidon Principles set out to disclose climate-relevant data on a yearly basis for shipping banks and in doing so set a benchmark of transparency that is now being replicated across the sector.

“Being transparent is the only way we can make change happen and better support clients in the crucial years for shipping decarbonisation ahead of us,” said Mr Parker.