Slowly but surely, ABN AMRO is helping to make shipping more sustainable

Ninety percent of all world trade now relies on shipping. In terms of the amount of carbon dioxide emitted for every ton of cargo, shipping is one of the most sustainable modes of transport, especially when compared with transport by road or air. What’s more, shipping accounts for only 3 per cent of global carbon emissions.

In absolute terms, though, seagoing vessels are polluters. Most cargo ships burn heavy fuel oil, a by-product of petrol and gas production. Carbon dioxide and sulphur oxides are released during combustion. A number of innovative developments could make ships much cleaner, but will require substantial investment. As one of the major lenders to the shipping industry, ABN AMRO is committed to playing a role in the decarbonisation of the sector. “Ultimately, our clients will need to capture their carbon emissions and use alternative fuels to meet the net-zero targets set by various global organisations and bodies,” says Anastassia Tcherneva, Head of Shipping Clients at ABN AMRO. “Together with our clients, we’re exploring options to make their ships more sustainable. Our clients include the biggest shipping companies in Europe, so I believe both in their intentions and in the positive impact we can make together.”

A data-driven bank for sustainable shipping

“ABN AMRO’s aim is to become a leading data-driven bank for sustainable shipping,” Anastassia continues. “To achieve that goal, we need to work together with the entire ecosystem, including our peer banks.” The bank’s sustainable ambitions for the sector are aligned with the requirements of the UN International Maritime Organization (IMO), which is calling for carbon emissions to be halved by 2050. However, the IMO is in the process of accelerating decarbonisation and plans to introduce a broader emissions scope (from well to wake), with a new directive expected to come into force in 2026. In preparation, decarbonisation trajectories and underlying assumptions, such as the availability of alternative low and zero-carbon fuels, are being examined.

Ambitious targets

“These are ambitious targets,” says Florin Boros, Senior Director of Lending Shipping at ABN AMRO. “Seagoing vessels have a lifespan of around twenty years and cost tens of millions of euros. Unfortunately, it’s not simply a matter of replacing all these ships overnight with more sustainable ones. That would be equivalent to a destruction of capital, and besides, it takes quite a few years to build a new ship.” Florin explains that shipping companies need to act now to meet their targets. That means investing in retrofitting existing vessels, for example, which involves modifying the engines so that a ship can run on an alternative fuel that substantially reduces harmful emissions.

Scalable technologies

Shipping companies will have to embrace sustainability, if only because of stricter regulations in the pipeline. Shipping companies currently using heavy fuel oil to power their fleets will have to install special scrubberson their ships to remove sulphur dioxide from the exhaust. Florin says, “Starting from 2024, ships with a capacity of 5,000 GT [ships with the largest volume above and below deck, ed.] will also be covered by the European Emissions Trading System (ETS). As a result, they will have to buy rights to emit carbon dioxide in the EU.” Anastassia adds, “Although it may not be perfect on launch day, I believe this trading scheme is certainly a step in the right direction. Meanwhile, the market should and will pursue its quest for scalable carbon capture technologies and address the supply of alternative fuels. The direction we’re heading in is very clear: it’s a trajectory that will require public–private cooperation, investment and research as a public good.”

Financing

ABN AMRO helps companies in the sector become more sustainable in a number of ways, one of which is through financing. Florin says, “We offer financing on favourable terms, with the company agreeing to put a portion of the loan towards sustainability – to meet the costs of retrofitting or otherwise modifying a vessel to make it more efficient so that it burns less fuel.” The success of this type of financing is growing in popularity among the bank’s European clients. The shipping company Stena and the methanol producer Proman recently benefited from a financing package from ABN AMRO to power the very first four large tankers with methanol. Methanol is far less harmful to the environment than oil-based fuels. Florin says, “These four large tankers show what we can do as a bank to support and incentivise the sector to move in the right direction in terms of decarbonisation.”

Knowledge tool

Boosting sustainability is all about sharing knowledge and lessons learned. ABN AMRO works closely with industry experts to identify suitable decarbonisation investments for clients. The bank is also developing a tool to enable faster and better decision-making to allocate capital to finance the energy transition in the shipping sector.

A full understanding of the sustainability transition in relation to the client portfolio is critical to achieving decarbonisation objectives. Since 2019, clients have been asked to provide extensive data on the sustainability of their fleets. Florin says, “These data help us look at our portfolio in a targeted way and compare it with our objective. They also facilitate reporting on progress. The first baseline measurement was carried out in 2021, and the team has been closely monitoring the reduction in emissions in the portfolio ever since.”

Moving forward

In December 2022, ABN AMRO published its climate strategy outlining its interim decarbonisation targets for 2030 and covering the most carbon-intensive sectors. Accordingly, the shipping portfolio must match or fall below the market curve set by the IMO. “This in itself is a significant ambition requiring diligence, data and determination,” says Anastassia. Research institutes are currently analysing decarbonisation curves in order to translate a forthcoming update into IMO regulations. “It’s very complex and relatively uncertain. But now is the time for us to chart the trajectories and get on with it. In addition, if we want to make an impact in such a complex transition, we’ll have to work together with other players. It’s all about moving forward.”