Danish Ship Finance, like any other business, need to take responsibility, mitigate risk and be mindful of the impact of our activities. Responsibility has always been a core value in our company and will continue to be in future. As corporate responsibility and sustainability converge and the definition of financial risks widens, we strive to ensure that our business activities and internal processes always reflects this.
Our client portfolio is comprised of reputable, top-tier shipowners. Competition for these clients is intense, but we are confident that our value proposition is one of the most attractive in the industry. Most of our clients have been with us for many years, and when we take on new clients, we are diligent in our assessment process. We take a number of steps to ensure that we preserve our reputation and track record before we embark on new client relationships (figure). Together, these measures allow us to ensure that we only enter into business with the most prudent, reputable shipowners.
We have implemented sustainability ratings for all clients, and have made these ratings part of our credit assessment process for all clients, existing and new. In addition, Danish Ship Finance joined the Poseidon Principles in 2019, and comitted to annual reporting about the climate alignment of our portfolio. This has given us a benchmark for the performance of our portfolio, and going forward we can now use this benchmark to take action to bring our portfolio into alignment. We have also seen growing demand from clients for sustainability-linked financing, and in 2020 we granted the first few loans with terms linked to sustainability targets. We see this as a focus area going forward, and will continue to develop our approach to these types of structures in the future.
In November 2020, we reported our first Portfolio Climate Alignment Score as part of our commitment to the Poseidon Principles. Our first reported climate alignment score was +6.7% for the in-scope portfolio. Due to shipowners’ reporting deadline to the IMO for the underlying data in 2020, the climate alignment score of the portfolio is based on the portfolio by end of 2019.
Danish Ship Finance joined the Poseidon Principles at the launch in June 2019 with 10 other banks. Since then the initiative has grown and now counts 26 financial institutions as Signatories.
The Poseidon Principles establish a framework for assessing and disclosing the climate alignment of ship finance portfolios. They set a benchmark for what it means to be a responsible bank in the maritime sector and provide actionable guidance on how to achieve this.
As a result, the Poseidon Principles will enable financial institutions to align their ship finance portfolios with responsible environmental behavior and incentivize international shipping’s decarbonization – to shape a better future for the shipping industry and society.
The Poseidon Principles are applicable to lenders, lessors, and financial guarantors globally. They are intended to evolve over time to address other adverse impacts.
Read more about the Poseidon Principles and the Technical Guidance at https://www.poseidonprinciples.org/
The Poseidon Principles Association is the governing body of the Poseidon Principles whose object is the management, administration and development of the Poseidon Principles. Signatories to the Poseidon Principles automatically become members of the Poseidon Principles Association.
The Poseidon Principles Association was formed on 18 June 2019 and is governed by a set of Governance Rules which provide guidance to existing and prospective Signatories on the processes for the management, administration and development of the Poseidon Principles.
Danish Ship Finance is represented on the Steering Committee, which coordinates the Association and Principles on behalf of its members.