UK consultants Maritime Strategies International (MSI) has added annual efficiency ratio (AER) calculations used in the Poseidon Principles to its Horizon platform showing that as of last year less than one in two ships was in compliance with the matrices developed by the green ship financing initiative. The AER created by many of the world’s top banks is based on grams of CO2 per dwt-mile.
Less than 50% of the sample was in compliance in 2020, with containerships the worst offenders, analysis by MSI shows.
Moreover, some more efficient designs are penalised by the current trajectory methodology. For instance, while new, fuel efficient designs of 38,000 dwt bulk carriers typically have lower estimated AER values than the older, less fuel-efficient 32,000 dwt vessels, trajectory values are based on different cohorts. A lower AER value for the larger 35,000 to 60,000 dwt band means that some fuel-efficient 38,000 dwt vessels fall foul of the trajectory and would in effect damage a bank’s AER performance.
The trajectory is moving quickly and will have an enormous impact on the ability of banks to meet their portfolio alignment goals unless action is taken swiftly. In the same dry bulk example, whilst around 50% of the ships between 30,000 and 40,000 dwt had AER values in 2020 below the trajectory, all else being equal this share would drop to just 22% in 2025.
“The ramifications of these findings are potentially far-reaching, skewing the provision of finance in favour of some vessel types, knocking on to decisions in the S&P markets, around newbuilding finance and shipyard preference for vessel contracts,” commented Will Fray, a director, at MSI. “A key plank of the principles is that they will adapt over time but the MSI analysis demonstrates this need is pressing.”