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The Poseidon Principles

A group of leading ship finance banks have developed a framework for sustainable lending…

As the global environmental movement continues to gather momentum it becomes increasingly clear that the responsibility for a sustainable future lies not with a single faction within the purchasing process, but rather with every faction involved in bringing a product to market. The Poseidon Principles are a framework for assessing and disclosing the climate alignment of ship finance portfolios. In other words, the principles allow financial institutions to determine the environmental impact of their ship finance portfolios in line with the IMO’s greenhouse gas emission targets. While the principles currently only relate to commercial tonnage, it seems likely that that a similar system will be applied to superyacht financing in the future.

In the superyacht world, perhaps more so than other industries, the environmental emphasis is often put on the end user. Indeed, you will often hear shipyards saying things like, “if the owner wants it we will build it.” Invariably you get some trail blazing early adopters – consider 107m SY Black Pearl for example. However, in order for change to be common place, consumers require the necessity of pressure from regulators, financial institutions and manufacturers. The Poseidon Principles represent the banks first step towards applying such pressure to superyacht buyers and builders.

Signatories of the Poseidon Principles, which currently stands at 13 leading banks, will measure the carbon intensity and assess climate alignment of their shipping portfolios on an annual basis. Carbon intensity will be assessed relative to established decarbonisation trajectories. Climate alignment is defined as ‘the degree to which a vessel, product, or portfolio’s carbon intensity is in line with a decarbonisation trajectory that meets the IMO ambition of reducing total annual GHG emissions by at least 50 per cent by 2050 based on 2008 levels.’

In order to ensure that the information provided under the Poseidon Principles is practical, un-biased and accurate, signatories will only use data types, sources, standards and service providers established by the IMO. Furthermore, in accordance with the Transparency Principle, accurate information will be published annually on the Poseidon Principles website.

The Poseidon Principles represent the banks’ commitment to lending sustainably. A project’s environmental viability will have now have an effect on the banks’ ability to finance it. The banks will further require that businesses provide continued environmental data in order to ensure the sustained viability of a given project.

“Whilst at present, the Poseidon Principles only apply to large commercial ships, with the increasing focus on emissions, particularly by coastal communities, including those in the south of France, it seems only a matter of time before those banks engaged in the financing of yachts also begin to review and update their lending criteria and environmental covenants. Owners looking to finance the purchase of a yacht or leverage an existing yacht should bear in mind that the choice of financiers may, in the future, be restricted if the yacht in question is not aligned with the applicable emissions targets,” explains the latest HFW Yachting Industry Briefing. 

With pressure coming from the IMO, who’s sulphur cap for marine fuels requiring the use of fuel with less than 0.5 per cent sulphur entered into force on 1 January 2020, as well as a greater sense of individual responsibility on the part of superyacht owners, buyers and shipyards, the addition of incentives relating to the financing or refinancing of superyachts would be another positive step in the right direction for the industry.

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