Season’s Greetings.

We wish to inform you about the recent developments regarding the Poseidon Principles (Financial Institutions) initiative, as detailed in the 2024 Annual Disclosure Report released on December 12, 2023. Please see the attached report. This report aims to enhance transparency concerning the alignment of ship finance portfolios with the objectives of the Poseidon Principles. It also provides updates on methodology changes and new signatories.

Key Highlights from the 2024 Report

Shift to Well-to-Wake Approach

The Poseidon Principles have transitioned from a “tank-to-wake” approach to a “well-to-wake” methodology for their Annual Efficiency Ratio (AER) and Capacity Gross Ton Distance (cgDist) metrics. This new framework offers a comprehensive view of emissions, encompassing the entire life cycle and including additional greenhouse gases such as methane and nitric oxide (NOx). While the exact sources of these emission factors remain unclear, they may derive from ongoing efforts by the IMO’s Group of Experts on the Scientific Aspects of Marine Environmental Protection.
It is important to note that while the IMO may eventually adopt a well-to-wake approach for regulations, current standards such as the Energy Efficiency Design Index (EEDI), Energy Efficiency Existing Ship Index (EEXI), and Carbon Intensity Indicator (CII) continue to operate on a tank-to-wake basis.

Misalignment of Ship Types

The report identifies significant misalignment with Poseidon’s targets for certain ship types, including cruise ships, RoRo vessels, high-speed ferries, shuttle tankers, and LNG bunker vessels. This misalignment arises primarily from operational characteristics such as high port idle times and short voyages, adversely affecting their AER and cgDist scores. Additionally, these vessels perform poorly under the CII rating system, not necessarily due to inefficiency but because their operational profiles are inadequately represented by either system. The Poseidon methodology does not accommodate correction factors, further complicating this issue.

Financial Implications

Financial institutions such as Danske Bank, DNB, and Société Générale utilise Poseidon ratings in their transactions, emphasising capital allocation for vessels aligned with decarbonisation objectives. For instance, Standard Chartered has established a 0% alignment delta target by 2030, reflecting a commitment to investing in environmentally sustainable vessels.
This relationship between Poseidon scores and financial outcomes raises concerns regarding the accuracy and fairness of these ratings, particularly as they influence funding decisions.

Future Considerations

Looking ahead, one proposed update involves separating the liquefied gas tanker trajectory into two distinct categories: one for LNG tankers and another for liquefied petroleum gas (LPG) tankers. Further refinements of scope and vessel categories—especially concerning cruise ships—are also being considered. Updates to emission factors may occur pending additional work by the IMO on Life Cycle Assessment (LCA) Guidelines.

We encourage all members to review the attached report to gain a comprehensive understanding of these developments.

Poseidon Principles Annual Disclosure Report 2024