September 9, 2023
Finance International

‘Green Finance’ has Adopted PP Or Encounter Survival Business Risk

The term ‘Green Finance’, came to my attention about two years ago, that caught me by surprise. At the time, I couldn’t realise, what it was all about exactly, what was behind of it, what was aiming at. Today, after some research on the jargon, I can understand that ‘Green Finance’ is interlinked with the Poseidon Principles (PP) adopted by the banks, and the insurance companies, to reflect the environmental impact which will be measurable as of this year through the CII requirements (Carbon Intensity Indicator) and will apply to all shipping companies.

Managing risks is part of MARASCO’s every day role in Marine Insurance business. Shipping community is again called to confront new challenges. Shipping is a capital intensive business and ‘Green Finance’ could critically affect borrowers banking eligibility and their insurability. In short, capital markets, leasing companies and banks will seriously consider the ‘green rate’ an applicant shipping company has been given, according to its ‘green footprint’ and to its CII rating, as per Poseidon Principles for Banks. PP reporting as a tool, to evaluate corporations and determine future financial performance is a possible scenario, from what we can deduce. Borrowing companies with poor decarbonization rate might encounter difficulties in the near future to access debt finance, or funding from financial institutions and consequently, might have troubles to expand, renew their fleet and eventually, as banking and insurance go hand in hand, might face some unpleasant reactions in terms and premium rates from Hull and P&I underwriters, who have adopted the Poseidon principles for Marine Insurance.

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