Poseidon Principles
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Last update : January 2022
The Poseidon Principles are a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios. They establish a common, global baseline to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals.
The Poseidon Principles are applicable to lenders, lessors, and financial guarantors globally. They are intended to evolve over time to address other adverse impacts.
As of January 2022, 27 financial institutions are Signatories to the Poseidon Principles, representing a bank loan portfolio to global shipping of approximately $185 billion – nearly 50% of the global ship finance portfolio.
Signatories commit to implementing the Poseidon Principles in their internal policies, procedures, and standards and to work in partnership with their clients and partners on an ongoing basis to implement the Poseidon Principles.
Why it matters
The Poseidon Principles aim to become a global standard in assessing the climate alignment of their shipping portfolio
The Poseidon Principles use carbon intensity relative to established decarbonization trajectories to measure climate alignment.
Climate alignment is defined as the degree to which a vessel, product, or portfolio’s carbon intensity is in line with a decarbonization trajectory that meets the IMO ambition of reducing total annual GHG emissions by at least 50% by 2050 based on 2008 levels.
The Poseidon Principles rely specifically on the Annual Efficiency Ratio (AER) as the carbon intensity metric. The AER uses the parameters of fuel consumption, distance travelled, and deadweight tonnage at summer draught.
To assess climate alignment of a single vessel, the vessel’s annual carbon intensity is compared with the decarbonization trajectory for its ship type and size class. The climate alignment of a product and or portfolio is a weighted average of the vessel carbon intensities in each product or portfolio.
Main areas of work related to climate mainstreaming:
The four Principles are the following:
Principle 1: Assessment of climate alignment: Signatories will, on an annual basis, measure the carbon intensity and assess climate alignment – carbon intensity relative to established decarbonization pathways – of their shipping portfolio using the methodology established by the Poseidon Principles.
Principle 2: Accountability: Signatories will rely on classification societies or other IMO-recognized organizations, and mandatory standards established by the IMO for the provision of un-biased information used to assess and report on climate alignment.
Principle 3: Enforcement: Standardized covenant clauses will be made contractual in new business activities to ensure access to high-quality data.
Principle 4: Transparency: Portfolio climate alignment scores will be published on an annual basis.