The Poseidon Principles have emerged as a crucial framework for evaluating how financial institutions' ship financing aligns with climate objectives. This fifth annual report provides valuable insights into the progress made and the areas that still require attention. Shipping, although lagging behind the IMO's emission reduction goals, is witnessing increased participation and transparency among leading financial institutions. Bank lending, accounting for approximately 62 percent of global shipping industry financing, serves as a vital source of capital for shipowners. With 35 signatories from 14 countries, representing nearly $240 billion or 80 percent of global shipping finance, the initiative is making significant strides.

Highlighting the Progress and Challenges

The average climate alignment scores have shown notable progression from the previous year. Portfolios are improving their alignment to the IMO's decarbonization trajectories, with a 7 percent overall improvement. However, there is a wide disparity, with some performing 70 percent above the trajectory and others 3.5 percent below. Four signatories disclosed scores of 10 percent or below, indicating the need for further improvement. The analysis of the 2023 reports suggests that while overall scores are misaligned, they are getting closer to the striving ambition. This milestone of five years since the initiative's announcement serves as a reminder of the critical decarbonization targets ahead.

Transparency and Evolution

Since its announcement in 2019, the initiative has witnessed increased transparency among participants. Five additional financial institutions released reports for 2023, demonstrating the growing commitment. The adoption of well-to-wake emissions reporting in 2023 is a significant evolution, encompassing full lifecycle emissions of fuels. This sets a new benchmark for climate reporting and aligns with the latest climate science and IMO's ambitions. While aligning with 2050 net zero goals remains a challenge, especially for certain vessel types, the continuous evolution of the program and the level of transparency it provides offer hope for addressing these issues.

The Role of Financial Institutions

Bank lending plays a crucial role in the global shipping industry, providing essential and often low-cost capital. The participation of financial institutions in the Poseidon Principles is not only driving change but also providing incentives for shipping companies to invest in green programs. As the initiative enters its sixth year, the shared commitment of signatories, shipping clients, and stakeholders is evident. Through collaboration and transparency, they are working towards decarbonizing global shipping and achieving significant progress.The full report, including individual report cards on financial institutions, is available online, allowing for a comprehensive understanding of the situation. This initiative is a testament to the power of collective action in addressing climate change and transforming the shipping industry.