ShipCalculators.com

Poseidon Principles

The Poseidon Principles are a voluntary framework launched on 18 June 2019 to integrate climate considerations into ship finance decisions and to provide a global standard by which signatory banks can disclose the climate alignment of their lending portfolios. Established by eleven founding banks (ABN AMRO, Amsterdam Trade Bank, BNP Paribas, Citi, Crédit Agricole CIB, Danish Ship Finance, Danske Bank, DNB, ING, Nordea, Société Générale) representing approximately USD 100 billion of shipping loans at launch, the Principles have since expanded to over 30 signatory institutions representing approximately USD 230 billion of ship finance and approximately 80% of the global ship finance market as of 2024. The Principles require each signatory bank to assess and publicly disclose, on an annual basis, the climate alignment of its ship finance portfolio against the IMO Greenhouse Gas Strategy trajectory, calculated using the Annual Efficiency Ratio (AER) of each financed vessel, weighted by exposure value. The framework was originally aligned with the 2018 Initial IMO GHG Strategy (50% absolute emissions reduction by 2050); following the 2023 Revised IMO Strategy’s adoption of net-zero by or around 2050, the Poseidon Principles methodology was updated in October 2023 to align with the new ambition, with revised decarbonisation trajectories applied to all signatory disclosures from the 2023 reporting year onward. The Principles are administered by the Global Maritime Forum (the secretariat) under the governance of a Steering Committee of signatory banks. Annual disclosure reports are published in December of each year through the Poseidon Principles website and are widely cited by RightShip, Sea Cargo Charter and other industry alignment initiatives. ShipCalculators.com hosts the principal computational tools: the Poseidon Principles alignment calculator implements the per-vessel Climate Alignment Score and the portfolio-weighted aggregation; the CII attained calculator provides the closely-related operational AER computation; the SFOC-to-CII converter bridges engine SFOC to the AER metric used in the Poseidon Principles. A full listing is available in the calculator catalogue.

Contents

Background and history

Pre-2019 ship finance climate context

Ship finance is a specialised banking sector serving the global merchant fleet, with ship loans typically structured as 5 to 12 year mortgages secured by the vessel hull. The total global ship finance market is approximately USD 290 billion as of 2024 (down from ~USD 450 billion at the 2008 peak), concentrated among approximately 50 major banks worldwide. The principal lenders historically were European banks (Nordea, DNB, Crédit Agricole CIB, BNP Paribas, ABN AMRO), with Asian banks (Bank of China, Industrial and Commercial Bank of China, China Development Bank, Mitsubishi UFJ, SMBC) growing significantly through the 2010s.

Through the 2000s and 2010s, ship finance was treated as a sector-specific lending discipline with limited integration of climate considerations. Lending decisions were typically based on vessel value, charter contract revenue, operator credit and historical default rates. Climate risk was implicitly priced through the cost of bunker fuel and through residual value risk if the vessel became commercially or regulatorily obsolete (e.g. due to tightening MARPOL standards), but these factors were not formally analysed.

2018 to 2019: the climate-finance gap

Two parallel developments in 2018 highlighted the need for a formal climate-alignment framework in ship finance:

  • The 2018 Initial IMO Strategy on Reduction of GHG Emissions from Ships (IMO GHG Strategy) committed the maritime sector to a 50% absolute emissions reduction by 2050. This implied that ships financed in 2019 (with 5 to 12 year loan tenors) would still be operational well into the 2030s, when the trajectory tightening would create stranded-asset risk for vessels that could not meet the trajectory.
  • The Task Force on Climate-related Financial Disclosures (TCFD) recommendations of June 2017 had set the global standard for corporate climate-risk disclosure, with banks under increasing pressure to disclose their financed emissions across all sectors. Shipping was the only major transport sector (alongside aviation) without a sector-specific disclosure framework.

The combination prompted Citi, Société Générale and DNB to convene discussions with peer banks in late 2018 about a voluntary disclosure framework specific to ship finance. The Global Maritime Forum (a Copenhagen-based industry NGO) was selected as the secretariat. The framework was developed through a series of working-group meetings between November 2018 and June 2019.

18 June 2019: launch with eleven banks

The Poseidon Principles were launched on 18 June 2019 at the Global Maritime Forum’s Annual Summit in Copenhagen, with eleven founding signatory banks:

BankCountry2019 ship-finance exposure (USD bn approx.)
BNP ParibasFrance14
ABN AMRONetherlands11
CitiUnited States11
INGNetherlands9
Crédit Agricole CIBFrance8
Société GénéraleFrance8
NordeaSweden / Finland7
DNBNorway7
Danish Ship FinanceDenmark6
Danske BankDenmark4
Amsterdam Trade BankNetherlands1

Combined exposure at launch: approximately USD 100 billion, representing approximately 35% of the global ship finance market.

2020 to 2024: expansion

The signatory base expanded steadily through 2020 to 2024. Notable additions:

  • 2020: NIBC Bank (Netherlands), KfW IPEX-Bank (Germany), Sumitomo Mitsui Trust Bank (Japan).
  • 2021: Lloyds Banking Group (UK), Standard Chartered (UK/Asia), Swedbank (Sweden).
  • 2022: Bank of America (United States), Sumitomo Mitsui Banking Corporation (Japan), Mizuho Bank (Japan), Mitsubishi UFJ (Japan).
  • 2023: Korea Development Bank, ICBC Leasing (China, first Chinese signatory), Bank of Communications.
  • 2024: HSBC (United Kingdom, long resisted then joined), Industrial and Commercial Bank of China, China Construction Bank.

By end-2024, the signatory base totalled approximately 32 institutions representing approximately USD 230 billion of ship finance, or approximately 80% of the global market by exposure value.

Methodology updates 2023 and 2024

The 2018 Initial IMO Strategy underpinned the original Poseidon Principles methodology. When the 2023 Revised IMO Strategy adopted net-zero by or around 2050, the Poseidon Principles Steering Committee initiated a methodology review, completing the October 2023 methodology update that:

  • Replaced the 50%-by-2050 trajectory with a net-zero-by-or-around-2050 trajectory.
  • Adopted the IMO 2030 indicative checkpoint (20%, striving for 30%) and 2040 checkpoint (70%, striving for 80%) as additional reporting milestones.
  • Tightened the alignment score boundaries to reflect the steeper trajectory.
  • Added a deliberation on whether to align with 1.5°C or 2°C temperature trajectories (deferred to a future update).

A further 2024 update added optional reporting on the Net-Zero Framework GFI standard (approved at MEPC 83 in April 2025) and the EU ETS Maritime financed-emissions accounting.

Governance

Steering Committee

The Poseidon Principles are governed by a Steering Committee elected from the signatory banks, currently comprising 8 members serving rotating 2-year terms:

  • 2 representatives from the original 11 founding banks (typically including DNB and BNP Paribas as long-standing leaders)
  • 2 representatives from the Asian signatories
  • 2 representatives from US signatories
  • 1 representative from the secretariat (Global Maritime Forum, non-voting)
  • 1 independent expert chair

The Steering Committee:

  • Reviews and approves methodology updates.
  • Reviews annual disclosure reports for consistency.
  • Manages the addition of new signatories.
  • Engages with the IMO, EU and other regulatory bodies on Poseidon Principles compatibility.

Global Maritime Forum (secretariat)

The Global Maritime Forum (GMF), based in Copenhagen, serves as the secretariat for the Poseidon Principles, providing:

  • Methodology development and maintenance.
  • Annual disclosure aggregation and publication.
  • Communication with signatory banks.
  • Engagement with the broader shipping industry through the GMF’s annual Global Maritime Forum Summit and the parallel Sea Cargo Charter initiative (the cargo-buyer-side equivalent of the Poseidon Principles, also administered by the GMF).

Steering Committee resolutions

Major Steering Committee resolutions are published on the Poseidon Principles website. Recent significant resolutions:

  • 2020 Resolution 1: Standardised methodology for joint-ventured vessels (proportional alignment by ownership share).
  • 2021 Resolution 2: Treatment of newbuild orders (alignment based on EEDI / EEXI design value at order date).
  • 2022 Resolution 3: Treatment of refinancing (alignment carries over from original loan).
  • 2023 Resolution 4: Net-zero-by-or-around-2050 trajectory adoption.
  • 2024 Resolution 5: Optional GFI alignment reporting.

Methodology

Annual Efficiency Ratio (AER) as the core metric

The Poseidon Principles methodology uses the Annual Efficiency Ratio (AER) as the operational climate metric per vessel, calculated as:

AER = total annual CO₂ emissions / (deadweight tonnes × distance travelled)

The AER is the same metric used by the IMO CII regime under MARPOL Annex VI Regulation 28 (with a ship-type-specific a coefficient and c exponent reference line per MEPC.337(76)). For most cargo ship categories (bulk carriers, tankers, gas carriers, container ships, general cargo ships, refrigerated cargo carriers), AER is the operative metric. For ro-pax, ro-ro vehicle carriers and cruise passenger ships, the cgDIST variant (g CO₂ per gross-tonne-nautical-mile) is used.

Climate Alignment Score (CAS)

The Climate Alignment Score (CAS) for an individual vessel is calculated as the percentage difference between the vessel’s actual AER (from IMO DCS data) and the trajectory AER for the vessel’s type and year:

CAS = (AERactual − AERtrajectory ) / AERtrajectory × 100

A positive CAS indicates the vessel is above the trajectory (worse than aligned); a negative CAS indicates the vessel is below the trajectory (better than aligned). A CAS of 0 indicates exact alignment.

The trajectory AER for each year is derived from the IMO GHG Strategy decarbonisation pathway, with the 2023 methodology update reflecting the net-zero-by-2050 ambition.

Portfolio-weighted alignment

The portfolio-level CAS is the exposure-weighted average of the per-vessel CAS values:

Portfolio CAS = Σ (CASvessel × Exposurevessel ) / Σ Exposurevessel

where Exposure is the loan amount outstanding for each vessel. The portfolio CAS is the headline disclosure number reported annually by each signatory bank.

The Poseidon Principles alignment calculator implements both the per-vessel and the portfolio-level calculations.

Trajectory definition

The 2018 Poseidon Principles trajectory was a linear interpolation between:

  • 2018 baseline: average AER of the 2018 fleet by ship type.
  • 2050 target: 50% reduction in absolute CO₂ emissions, translated to an AER reduction trajectory.

The 2023 update revised the trajectory to:

  • 2018 baseline: unchanged.
  • 2030 milestone: 20% reduction (striving for 30%) per the IMO 2023 Strategy.
  • 2040 milestone: 70% reduction (striving for 80%) per the IMO 2023 Strategy.
  • 2050 target: net-zero-by-or-around-2050 per the IMO 2023 Strategy.

The trajectory is calibrated separately for each ship-type-and-size category, with the steepest reductions in the 2030 to 2040 period to align with the IMO’s progressive tightening.

Annual disclosure

Reporting cycle

Each signatory bank publishes its annual disclosure report in December of each calendar year, covering the previous calendar year’s portfolio data. The reporting cycle:

  • January to June year+1: data collection (using IMO DCS data submitted by 31 March).
  • July to October year+1: third-party verification by an accredited verifier (typically ABS, DNV, Lloyd’s Register or Bureau Veritas).
  • November year+1: bank-level disclosure preparation.
  • December year+1: simultaneous publication of all signatory disclosures on the Poseidon Principles website.

Disclosure content

The annual disclosure includes:

  • Portfolio-level CAS (the headline number).
  • CAS by ship type (bulk carriers, tankers, container ships, gas carriers, etc.).
  • Number of vessels in portfolio.
  • Total exposure (USD).
  • Year-on-year CAS trajectory (showing improvement or deterioration).
  • Methodology notes (any specific deviations from the standard methodology).

2024 disclosure highlights

The December 2024 disclosure (covering 2023 data) showed:

  • Aggregate Poseidon Principles portfolio CAS: +5.2% (above trajectory, i.e. behind the IMO Strategy).
  • Best performer: BNP Paribas at -1.8% (slightly below trajectory).
  • Range across signatories: -1.8% to +12.5%.
  • Bulk carriers: +7.1% portfolio CAS (the most-misaligned segment, reflecting the older average age of the dry bulk fleet).
  • Tankers: +4.3% portfolio CAS.
  • Container ships: +2.1% portfolio CAS (the best-aligned segment, reflecting newer LNG-fuelled fleet additions).
  • LNG carriers: +0.8% portfolio CAS.

The aggregate +5.2% indicates that the financed shipping portfolio is currently emitting approximately 5% more CO₂ per transport unit than the IMO trajectory requires for 2023. This represents an improvement from +7.8% in the 2022 disclosure, suggesting that the trajectory tightening effect of EEXI and CII is beginning to be reflected in the portfolio data.

Signatories and global coverage

Current signatories (as of 2024)

RegionBanks
Western EuropeBNP Paribas, ABN AMRO, ING, Crédit Agricole CIB, Société Générale, Nordea, Lloyds, Standard Chartered, NIBC, KfW IPEX, HSBC, Swedbank, Danske Bank, DNB, Danish Ship Finance, Amsterdam Trade Bank
Northern Europe(above + Norwegian-Swedish-Finnish coverage)
North AmericaCiti, Bank of America
Asia (Japan)Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank
Asia (China)Bank of Communications, ICBC Leasing, Industrial and Commercial Bank of China, China Construction Bank
Asia (Korea)Korea Development Bank

Total: approximately 32 banks; market coverage approximately 80% by exposure value.

Notable absentees

Several major ship finance lenders have not signed the Poseidon Principles (as of end-2024):

  • Goldman Sachs (US): limited shipping exposure but a notable absence.
  • Morgan Stanley (US): similar.
  • Crédit Suisse / UBS (Switzerland post-merger): has been in discussions since 2022 but no announcement.
  • Bank of China (China): large ship finance portfolio but Chinese state-owned bank governance considerations.
  • Russian state banks (Sberbank, VTB, Gazprombank): outside Western financial system since 2022.
  • Arab Banking Corporation, Emirates NBD, First Abu Dhabi Bank: Gulf-region banks expanding into ship finance.

The Steering Committee has identified expansion into Chinese banks (beyond the four already signed), Indian banks (State Bank of India, ICICI Bank, both with growing ship finance portfolios) and Singapore banks (DBS, OCBC, UOB) as priority targets for 2025 to 2027.

Sea Cargo Charter

The Sea Cargo Charter is the cargo-buyer-side equivalent of the Poseidon Principles, also administered by the Global Maritime Forum. Launched in October 2020 with major commodity traders and shippers (Cargill, Trafigura, Vitol, Shell Trading, Glencore, Olam, Bunge, Equinor), it requires charterers to disclose the climate alignment of their chartered shipping activities using the same AER-based methodology. As of end-2024, approximately 40 charterers have signed, representing approximately 25% of global cargo shipping by volume.

RightShip GHG Rating

The RightShip GHG Rating is a commercial vessel-screening service operated by RightShip Pty Ltd (an Australian-Greek joint venture), which publishes per-vessel GHG ratings (A to G scale) used by cargo owners and charterers in vessel-selection decisions. The RightShip rating is methodologically similar to the Poseidon Principles CAS but is per-vessel rather than per-portfolio and is commercial rather than voluntary-disclosure. The two frameworks are widely used together: signatory banks use the Poseidon Principles for portfolio disclosure, while the RightShip rating is used for vessel-level screening. The RightShip GHG calculator implements the RightShip methodology.

Net-Zero Banking Alliance (NZBA)

The Net-Zero Banking Alliance, part of the Glasgow Financial Alliance for Net Zero (GFANZ) launched at COP 26 in November 2021, is the broader cross-sector banking-climate-alignment initiative. NZBA member banks commit to align their lending portfolios with the IPCC 1.5°C target across all sectors. Most Poseidon Principles signatories are also NZBA members; the Poseidon Principles serve as the shipping-sector implementation of the broader NZBA commitments for those banks.

Partnership for Carbon Accounting Financials (PCAF)

The Partnership for Carbon Accounting Financials, launched in 2015, sets the global standard for financed emissions accounting (the calculation of GHG emissions attributable to bank loans and investments). PCAF Standard Part A covers six asset classes including business loans (which encompasses ship loans). Most Poseidon Principles signatories also report under PCAF; the Poseidon Principles methodology is aligned with PCAF for the shipping-specific calculation.

Comparison summary

FrameworkScopeSignatoriesDisclosure
Poseidon PrinciplesShip finance lenders~32 banks (~80% of market)Annual; per-bank portfolio CAS
Sea Cargo CharterCargo buyers / charterers~40 charterers (~25% of cargo)Annual; per-charterer CAS
RightShip GHGPer-vessel ratingsCommercial; ~12,000 vessels ratedContinuous; per-vessel A-G score
NZBA / GFANZAll banking sectors~140 banks globallyAnnual; per-bank cross-sector
PCAFAll financed emissions~600 institutionsAnnual; per-institution per-asset-class

Critical assessment

Effectiveness

The Poseidon Principles have been credited with three significant impacts on ship finance:

  • Tightening of credit terms for misaligned vessels: signatory banks now typically apply higher loan margins, shorter tenors and stricter loan-to-value ratios to vessels with positive CAS scores.
  • Premium financing for aligned vessels: vessels with negative CAS (better than trajectory) typically attract preferential terms, including up to 25 to 50 basis points lower margins.
  • Discouraging new HFO-only vessel orders: several signatories have publicly announced that they will not finance new HFO-only newbuildings, requiring at least dual-fuel readiness.

The Steering Committee’s annual reviews suggest that approximately 10 to 15% of new ship loans in 2023 to 2024 had explicit Poseidon Principles alignment criteria embedded in the loan documentation.

Limitations

The Principles have also been criticised:

  • Voluntary: non-signatory banks (notably Bank of China, Goldman Sachs, several Russian and Gulf banks) face no equivalent disclosure pressure. The 80% market coverage means 20% of ship finance is unaffected.
  • Trajectory-based, not absolute: the AER trajectory allows a vessel that is becoming less efficient over time (due to age) to still be “aligned” if the trajectory has tightened slowly. Critics argue this masks absolute emissions growth.
  • Lagging IMO updates: the 2023 Revised IMO Strategy was published in July 2023, but the Poseidon Principles methodology update only took effect from the 2023 reporting year (December 2024 disclosure). Critics argue this 18-month lag undermines real-time accountability.
  • Self-reported: while third-party verified, the signatory bank still selects the verifier. The Steering Committee does not conduct independent audits of methodology application.

Future direction

The Steering Committee’s 2024 to 2025 work programme covers:

  • Methodology alignment with the IMO Net-Zero Framework GFI standard (operational from 2027).
  • Methodology alignment with the EU ETS Maritime and FuelEU Maritime financed-emissions accounting.
  • Possible 1.5°C-compatible trajectory option (in addition to the IMO net-zero trajectory).
  • Expansion to leasing finance (currently the leasing market is partially covered through ICBC Leasing’s signature; SMBC Leasing and Mitsubishi UFJ Lease are candidate signatories).
  • Expansion to Asian banks (Indian, Singapore, Indonesian targets).

Future outlook

The principal developments expected through 2030 are:

  • 2025: 2024 reporting year disclosure published in December; expected aggregate portfolio CAS continuing to improve as EEXI and CII compliance ramps up.
  • 2026 to 2027: methodology integration with the IMO Net-Zero Framework and EU ETS Maritime financed-emissions accounting; expansion into Asian and Gulf banks.
  • 2028 onwards: review against the IMO 2030 indicative checkpoint (20% to 30% absolute reduction); possible methodology revision to require 1.5°C-compatible trajectory option.
  • 2030: 10-year anniversary; Steering Committee planning a comprehensive framework review and possible mandatory inclusion mechanism (linked to bank licensing in some jurisdictions).

By 2030 the Poseidon Principles are expected to have become the de facto global standard for ship finance climate disclosure, with 90%+ market coverage and integration with the major regulatory regimes (IMO Net-Zero Framework, EU ETS Maritime, UK ETS for shipping). The principal open question is whether the framework will remain voluntary or be incorporated into mandatory bank disclosure requirements (e.g. EU Sustainable Finance Disclosure Regulation, UK Sustainability Disclosure Requirements).

See also

References

  1. Poseidon Principles. The Poseidon Principles: A Global Framework for Responsible Ship Finance. 18 June 2019; methodology updated 2020, 2021, 2023, 2024.
  2. Poseidon Principles. 2024 Annual Disclosure Report (covering 2023 data). December 2024.
  3. Poseidon Principles. Methodology Update: Net-Zero by or around 2050 Trajectory. October 2023.
  4. Global Maritime Forum. Sea Cargo Charter: Methodology Document. October 2020.
  5. IMO MEPC. Resolution MEPC.304(72) - Initial IMO Strategy on Reduction of GHG Emissions from Ships. IMO, 13 April 2018.
  6. IMO MEPC. Resolution MEPC.377(80) - 2023 IMO Strategy on Reduction of GHG Emissions from Ships. IMO, 7 July 2023.
  7. IMO MEPC. Resolution MEPC.337(76) - 2021 Guidelines on the Reference Lines for CII. IMO, 17 June 2021.
  8. RightShip Pty Ltd. RightShip GHG Rating Methodology v.4. Melbourne / Athens, 2023.
  9. Net-Zero Banking Alliance. NZBA Commitment Statement. UN Environment Programme Finance Initiative, 2021.
  10. Glasgow Financial Alliance for Net Zero. Annual Report 2024. GFANZ Secretariat, London, 2024.
  11. Partnership for Carbon Accounting Financials. PCAF Global GHG Accounting and Reporting Standard, Part A. PCAF, Amsterdam, 2022 edition.
  12. UNEP Finance Initiative. Climate Risks for Banks: A Compendium of Approaches. UNEP FI, Geneva, 2023.
  13. Task Force on Climate-related Financial Disclosures. 2017 Final Report and 2024 Status Report. TCFD, 2017 and 2024.
  14. International Energy Agency. Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach. IEA, Paris, 2023 edition.
  15. Marine Money. Annual Ship Finance Survey 2024. Marine Money International, New York, 2024.

Further reading

  • Poseidon Principles. Annual Disclosure Reports 2020 to 2024. Available at https://www.poseidonprinciples.org.
  • Global Maritime Forum. Annual Summit Reports 2019 to 2024. Available at https://www.globalmaritimeforum.org.
  • DNV. Maritime Forecast to 2050. DNV, Oslo, 2025 edition.
  • Lloyd’s Register. Climate-Aligned Ship Finance: A Practical Guide. Lloyd’s Register Marine, London, 2024.