Norway’s municipal pensions giant KLP has joined forces with other Nordic financial institutions and the country’s government to put together a set of guidelines for the shipping industry – to create transparency as companies seek cut-price financing to fund their transition to climate-friendly fuel.

The project has been conducted through the Green Shipping Programme, a public-private partnership in Norway – which has one of the longest coastlines in the world. The programme aims to promote the transition to net-zero emissions in the sector and increase its industrial competitiveness.

Banks Swedbank, DNB, Danske Bank, Norway’s Ministry of Climate and Environment and maritime industry adviser DNV are the other partners behind the launch.

Lars Erik Mangset, chief climate change adviser at KLP – who has led the work on standardising green transition financing – said: “It’s not easy to quantify the actual reduction of greenhouse gas emissions or to measure achievements within other Sustainable Development Goals.

“The aim of the GSP has therefore been for lenders to get together and agree on a standard for green transition financing that can be applied to the different shipping industry actors,” he said.

Under the new framework, only projects directly linked to the goals of the Paris Agreement should receive green transition financing, Mangset said.

“Lenders will be required to publicly report on aggregate lending volumes and the emission reductions achieved as a result of the financing provided,” he said, adding that this was an important change for both the lenders and borrowers, and would create more transparency in the market.

Mangset said there were few green bonds from the shipping industry, but that investors did not only want to invest in what was considered green today.

“They also want to contribute in driving emissions down from hard-to-abate sectors,” he said.

The “Guidelines for Transition-Linked Financing” outline how shipping companies should align their emission-intensity performance with a pathway towards net-zero emission by 2050, and take steps towards alignment with the Do No Significant Harm (DNSH) criteria under the environmental objective of climate change mitigation in the EU Taxonomy, according to the newly-published document on the code.

Asked by IPE whether KLP itself had a big appetite for investment in shipping transition-linked financing, Mangset said the institution did not have a specific mandate for such assets, “but we have the intention to partner up with at least one bank on the possibility of co-investing in such transactions”.

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