CWR: Banks Increasingly Base Ship Financing Decisions On Energy Efficiency Data

Shipping banks such as KfW IPEX-Bank said that they had analysed their investment portfolios according to the energy efficiency rankings of ships.

Banks making decisions on whether to finance vessels are increasingly basing their assessments on energy efficiency data, according to environmental group Carbon War Room (CWR) in an emailed statement. 

The Richard Branson-helmed group said that it surveyed leading shipping banks such as HSH Nordbank and KfW IPEX-Bank.

It found that the banks used vessel efficiency rankings as an important gauge of risk and return, with the more efficient vessels favoured as they were desirable and potentially gave a higher rate of return.

By contrast, inefficient ships now reportedly present a higher risk to banks. 

"As a consequence of the correlation of energy efficiency and loan risk, we have analysed our shipping portfolio based on the methodology of the Energy Efficiency Design Index (EEDI) and implemented design efficiency criteria in our credit approval process," said Carsten Wiebers, Global Head of Maritime Industries at KfW IPEX-Bank. 

According to the surveyed banks, energy efficiency data was also a deciding factor in the approvals for credit for vessel purchases, loan assessments for retrofit projects, and in re-selling or scrapping decisions. 

The criteria has now reportedly led to the emergence of a two-tier system, especially as a quarter of the non-container charter market now examines potential vessels for efficiency, said CWR. 

"We see a clear trend towards a two-tier market of high- and low-efficiency vessels - more energy efficient vessels have an enhanced marketability as well as a higher revenue potential for the ship owner and thus a more favourable risk profile for financiers," said Wiebers. 

Early last year, Branson and CWR praised two Canadian ports for being the first ports to implement a discount system based on ratings produced by CWR's EVDI monitoring system.