Sustainable shipping from a bankers perspective

Wagenborg has long been an important customer of ABN Amro. Gorgels: “ABN Amro’s shipping portfolio is considerable. We are one of the most important ship financiers in the Netherlands, but also worldwide. Our books contain some 2,000 merchant ships that we finance, including those of Wagenborg. Because we are one of the most important financiers and we consider sustainability to be of paramount importance, we really try to play a role in this for the industry. We are one of the first banks to adhere to the Poseidon Principles. This means that we measure the footprint of the portfolios that we finance in order to assess whether our portfolios are in line with the set climate goals.”

The first Poseidon Principles Annual Disclosure Report has recently been published. This includes the extent to which the participating financial institutions follow the IMO CO2 reduction with their financed portfolio. Gorgels: “The report gives us insight and reason to talk to shipping companies about how they can make them greener. On the one hand, this is about how you can make ships that are already on the water more efficient. In order to properly assess this, we work with RightShip, an independent expert in the field of shipping and sustainability. Furthermore, we have set ourselves as a KPI to no longer finance F and G labeled ships, but to focus more on A, B and C labeled ships. This not only gives you a greener portfolio;  financing and money also go to green projects and ships: that is the goal.”

There is a lot of debate in the sector about how best to build new ones. Since much is still unclear about the fuel for the future, it seems obvious to focus on other aspects of sustainability in the coming years. Kuiken: “In terms of technology, we are going to experience a lot in the next five years. From applying new methods to alternative fuels, new engines or propulsion mechanisms. I also expect more “smaller” things that help reduce emissions, such as more efficient sailing, remote control, wind assistance, nozzles, bulb adjustments, etc.“

Gorgels: “I myself see a clear split. On the one hand, it is possible to invest a few more million in the  greening of  ships younger than 10 years old, for example through wind propulsion; that can still be used during the term of the ship. On the other hand, you have to look carefully at the business case for a new ship. A new, much greener ship would also be a lot more expensive at the moment. How does the business case work? What does not work is to build a greener ship, which costs 30% more and for which the fuel is also 50% more expensive. Governments could help with subsidies. I also believe that shipowners can demand a long-term contract with a slightly higher charter rate from cargo owners to cover the initial additional costs; they also want greener ships, don’t they?“

In tramp shipping, however, ships do not sail dedicated to 1 customer, so the balance between greening and return remains. Kuiken: “I also see this enormous challenge. Shipowners must be careful in managing their fleet and in slowly renewing and greening the fleet. This certainly places demands on their replacement planning. What you can do at large docking projects, you should definitely take along. We know that shipowners are forced by legislation to use other fuels or install a ‘ballast water treatment’ system. That  already makes a considerable claim on the available financing space, especially in the short sea sector. Nevertheless, the good parties such as Wagenborg can manage that very well. I also see this reflected in Wagenborg’s objectives and sustainability report. Major steps have been taken, also in the awareness of sustainability. Looking at the peers, Wagenborg has an average young fleet and the replacement of ships is well planned. It is a nice signal how Wagenborg is thinking about this and is working on it; that is the gain of
recent years. This meets our goals in our commitment to the Poseidon Principles.”

Sectors in which the assets require large investments, such as shipping and aviation, are very difficult to green up quickly. It is a transition in which changes are gradual. Kuiken: “This entire transition is of course also an opportunity, it is just business. For Wagenborg, but also for us. Of course we have to do something to make the world a better place. And that realization is getting a lot stronger. I see it as our role to take steps in this and provide incentives where necessary. We try to steer to achieve the 2050 targets and preferably a little earlier and a little better. As ABN Amro, we have already rolled out the first rewards for greening by setting KPIs in this area to our customers: achieving targets results in interest discounts. This allows you to link the price of financing to the sustainability objectives. That is a new trend.”

Due to poor past performance and increasing regulations, a retreating movement of the traditional financiers can be seen. Gorgels: “We see hesitation in the market. However, we do not want to be closed to the  shipping industry, but look together critically at options for the future. I think there is always financing and funding available for good projects and good shipping companies.”

Kuiken: “One of our most important slogans is ‘banking for better, for generations to come’, and that is what we give substance to. By looking to the future and setting an example yourself. We ask our customers to go along with this. You can expect us to take up our role and develop initiatives to initiate the process. Giving incentives for greening is something we will continue to do and may even do more in the future. We expect that Wagenborg will be able to follow the Poseidon Principles with the mix of their fleet. Wagenborg can distinguish itself in this through innovation, by being proactive, through transparency, good reporting and, above all, a good business case. Ultimately, it is a good business case for both of us. There are plenty of  initiatives going on and now and then you just have to grab your chance.”