Roundtable Focuses on Ship Finance Challenges Posed by Decarbonisation

CWR and the CPLC are warning of risks presented by shipping industry decarbonisation. File Image / Pixabay

Carbon War Room (CWR) says that, at a Global Maritime Forum roundtable in London on Tuesday, the NGO, along with the Carbon Pricing Leadership Coalition (CPLC), worked with shipping leads from major global financial institutions to assess challenges of decarbonisation for ship financing.

"Many global financial institutions have committed to bringing their portfolios in line with the transition to a low-carbon economy. To fully achieve this, they must address the climate risks to hundreds of billions of dollars in shipping investments that will emerge as soon as 2023," said Maurice Meehan, Director of Global Shipping Operation at CWR.

The roundtable was held as part of the work of the Task Force on Decarbonizing Shipping - an industry-led initiative intended to develop actionable decarbonisation pathways for the industry.

"Ships are carbon-intensive assets designed with a life span of up to 30 years. A newbuild financed today will likely need to operate under a carbon price before its first five-year drydock, when modifications can be made," said James Mitchell, finance lead of CWR's shipping programme.

"Yet today most lenders are making decisions without even factoring energy efficiency into lending decisions. By the end of its life span in 2050, that vessel could need to operate close to 90 percent more efficiently than when it was first delivered. We are working to ensure that the expertise of ship financiers is fully leveraged to enable and even accelerate the profitable decarbonisation of the shipping industry."

Alongside the launch of a report "Preparing shipping banks for climate change: How can internal carbon pricing help ship-financing banks in risk management?" CWR and the CPLC have urged shipping's financial institutions to begin analysing and managing risks presented by the shipping industry's imminent decarbonisation.

"As nations implement the Paris Agreement, the financial sector is also working to understand and manage the risks and opportunities created by this fundamental shift in the global economy," said Angela Churie Kallhauge, CPLC lead.

"The CPLC, a global convener of governments, businesses and civil society around carbon pricing, works with partners to share experiences, methodologies and challenges as different sectors begin to incorporate climate risk and opportunity into their business plans. In the shipping industry, financiers will play a key role in ensuring the successful decarbonisation of the sector."

In February, CWR and University Maritime Advisory Service (UMAS) released a report that suggested that, with the onset of climate policies by 2023, decarbonisation will pose increased risks to the banks that hold approximately $400 billion of the world's shipping debt.