Transition-linked financing: New guidelines for the shipping sector

New guidelines aim to standardise transition-linked financing for the shipping sector. The guidelines are developed by Danske Bank together with experienced industry participants under the Green Shipping Programme.

Shipping is the most carbon-efficient mode of commercial transport. Nevertheless, the industry is responsible for 2.9 percent of global greenhouse gas (GHG) emissions and thus must play its part in the transition to a net-zero economy. 

To support the transition of the shipping sector, Danske Bank together with other industry participants have developed new guidelines for transition-linked financing.

Transition-linked financing aims to improve the borrower’s environmental profile over the term of the loan or bond. The environmental profile is captured through the assessment of selected KPIs.

By developing new guidelines with a standard for transition-linked financing, the aim is to make it more transparent and attractive for shipping companies to initiate and finance transitional activities.

“We are working, as a leading Nordic bank and with the resources we have at our disposal, constantly to create sustainable solutions that can help solve the global climate challenges. Therefore, it is a major step in the right direction that we are now launching a Nordic cooperation to create common guidelines for the transitional financing of the shipping industry,” says Mikko Tapio Eloranta, Head of Sustainable Finance Nordic at Danske Bank. 

The new guidelines
The new guidelines are based on the principles for sustainability-linked loans and bonds, with extensions and specifications to reflect a greater need for transparency and accountability from shipping companies in transition.

More specifically, the guidelines outline that shipping companies that issue a transition-linked bond or borrow a transition-linked loan should specifically report performance on selected KPIs for:
 
  • Decarbonisation: For GHG emissions, borrowers should use the relative intensity metric Annual Efficiency Ratio (AER) and be aligned with a target of zero GHG emissions in 2050 in line with the method provided by the Climate Bond Initiative and the Poseidon Principles.

  • Alignment with EU Taxonomy: Borrowers should take steps towards alignment with the ‘Do No Significant Harm’ (DNSH) criteria of the EU Taxonomy, specifically on elements that are currently unregulated: underwater noise, biofouling, and ship recycling.

Read more in the Guidelines for transition-linked financing

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