Green shipping certification scheme that excludes all vessels dedicated to transporting fossil fuels aims to point investors towards shipping projects aligned with global climate goals
The Climate Bonds Initiative has formally launched criteria that sets out which shipping projects and assets are compatible with a low carbon, climate resilient economy and are thus eligible for certification under its industry-leading climate bond labelling scheme.
The rules set out how no ships primarily dedicated to transporting fossil fuels will be endorsed by the Climate Bonds Standard, the investor-led certification scheme which signals to financiers that an investment is aligned with the 2C warming limit set out by the Paris Agreement.
In contrast, zero emission ships or ships with a below-average operational emissions performance and a "managed reduction plan" in place that sets out how the ship aims to reduce its emissions to zero will be eligible for certification under the scheme.
Andrew Stephens, executive director of the Sustainable Shipping Initiative, said the newly-launched shipping criteria provided "clear guidance" to investors that would allow them to "leverage their influence in the industry and drive the transition to climate-aligned shipping investments".
The criteria were developed by a technical working group led by University College London's Tristan Smith and Sophie Parker, which consulted with a diverse team of shipping industry experts.
Parker explained the new green bond criteria - which consider both the operational emissions intensity of shipping assets and the cargo they carry - would allow investors make more informed and climate-aligned investment decisions, while encouraging asset owners to boost the environmental credentials of their shipping projects.
"By requiring issuers to consider how the asset will stay aligned with a trajectory to zero emissions by 2050, the criteria provide more transparency to the market, so that financiers can make informed decisions about how their assets will contribute to climate action and mitigate the climate risks that could affect the valuations of their assets," she said.
The UN agency for shipping, the International Marine Organisation (IMO) has come under fire by green groups over a plan that is expected to be approved at meetings next week that would delay hard enforcement of operational carbon efficiency rules for shipping vessels until 2029, a move critics say will prevent the sector from delivering much-needed carbon reductions over the decade to come.
However, industry players contend that a new mandatory operational efficiency rating system, where ships are rated on an A to E grading system will subject poor-efficiency ships to the power of the market.
The Climate Bonds Initiative is hoping that the introduction of new criteria for the sector can also help create market conditions that incentivise investments in greener shipping projects that slash emissions from a sector, which is currently responsible for roughly 2.5 per cent of global emissions.
"The shipping sector has an opportunity to rapidly transition towards zero carbon emissions," said Climate Bonds Initiative chief executive Sean Kidney. "The introduction of the Shipping Criteria to the Climate Bonds Standard opens up another science-based investment pathway for capex to be applied in this sector and deliver a range of positive environmental impacts."
The new criteria comes as industry group the Energy Transitions Commission and influential trade association the International Chamber of Shipping this week published major reports providing their take on the innovation and technologies required to decarbonise the sector, ahead of a critical meeting of the IMO's Marine Environment Protection Committee (MEPC) later this month.