Financial institutions increasingly factor in sustainability into their lending criteria as the trend towards sustainable investment grows. An energy efficient vessel has lower fuel costs and better chartering potential which can ensure greater return on investment over the life of the vessel. Also a more efficient vessel will more closely align with an organisation’s Corporate Social Responsibility (CSR) requirements.
Given the current over-supply of vessels in the market, it makes economic sense for banks to reduce their risk by financing energy efficient assets, particularly given the typical 25-30 year investment horizon.
The GHG Emissions Rating provides a standard framework for measuring the efficiency of an investment portfolio and the ability to track changes over time. Financial institutions can also use the GHG Emissions Rating to map the correlation between investment risk and vessel employment as an increasing number of charterers seek out more efficient vessels.
Energy efficiency data is also being used in credit-approval processes for vessel purchases, loan assessments for retrofit projects and re-sell of scrapping decisions, with banks citing efficiency as a key indicator for a vessel’s profitability.
Banks such as ABN Amro, HSH Nordbank and KfW IPEX have also recently announced their use of RightShip’s GHG Emissions Rating to assess risk and return, with inefficient vessels now representing a higher-risk investment.
"RightShip’s Ship Vetting Information System complements our internal risk management procedures during the vessel loan underwriting process. SVIS provides an instantaneous risk rating of the vessel under consideration and we can also review the star rating of the owner’s fleet and ship manager associated with the vessel. Sustainability is one of ABN Amro’s business principles and we can now factor a vessels’ energy efficiency into our underwriting process."
Global bank ABN Amro began subscribing to RightShip in 2009 to complement their internal risk processes.