The shipping industry is facing ESG heat from lenders

A view of stacked shipping containers in Southampton Docks, Southampton, UK 18th October 2021. Image taken with a drone. REUTERS / Matthew Childs

LONDON, October 19 (Reuters) – According to the Boston Consulting Group (BCG), banks are demanding much more environmentally friendly funding for shipping companies as investor pressure grows on the sector to speed up the environment.

Shipping, which carries about 90% of world trade, is responsible for nearly 3% of global carbon emissions, and BCG predicts the industry will need $ 2.4 trillion to achieve net-zero emissions by 2050.

“ESG-driven inquiries are already prompting the banks to take further measures. The shipping industry is already feeling it and they (shipping companies) are now under pressure, ”said Peter Jameson, partner at BCG, who are advisors for the COP26-UN climate summit, which is starting Oct. 31.

Standard Chartered (STAN.L) has already provided loans to the Odfjell drilling group and the shipping division of the Omani Asyad Group in connection with sustainability goals, the bank said.

“When it comes to lending for new assets, banks will create a larger channel for carbon reduction through their policies,” Jameson told Reuters.

“Banks are also seeing insurance companies feeling pressure from shareholders, and this is also leading to a re-evaluation of the major pension funds.”

Leading shipping financiers are currently providing the industry with nearly $ 300 billion in loans annually, analysts estimate.

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

Most of the total – around $ 1.7 trillion – would go towards developing future fuels.

“Sources of funding are becoming available, but many more are needed,” said Jameson.

According to BCG, ESG-related assets under management are expected to account for up to 80% of total lending to shipping by 2030.

The UN’s International Maritime Organization (IMO) has announced that it will reduce greenhouse gas (GHG) emissions from ships by 50% by 2050 from 2008 levels, but industry groups are demanding more progress from governments.

“The risks to the balance sheets will result in more questions being asked of the IMO,” said Ulrik Sanders, managing director of BCG, adding that it would “spur more decarbonization measures.”

Adaptation by Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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