Jan Ole Huseby, head of global ocean industries at DNB, one of the world’s leading shipping banks, discusses how innovative new products, small steps and valuable partnerships can accelerate sustainable progress.
Financing the transition of capital-intense maritime industries is challenging, especially within a climate of geopolitical uncertainty, unpredictable markets, and competing green technologies. However, make the right moves at the right time, with the right financial partners, and the rewards can outweigh the risk.
“We don’t want to adopt a wait and see attitude to the future, we want to help enable, and steer, the industry forward.
DNB has recently developed the Transition Loan Framework. Huseby says: “We see this as a positive step on the pathway to sustainability both for customers seeking change, and for a financial industry that must support them on that journey.
Sustainable steps
Transition loans are a relatively new concept. They open an accessible route into sustainable financing, supporting companies that are committed to work towards decarbonization, but who may not yet qualify for traditional ‘green’ financing.
Huseby explains: “Transition loans are about creating a bridge, allowing companies in traditionally high-emitting sectors, such as shipping, to take important first steps to reduce emissions, while still achieving the financial and reputational benefits of sustainable finance.”
As such, they’re about accelerating the shift from brown to green for industry at large; ensuring that the transition becomes possible for all players, rather than just those capable of making headline grabbing investments in trailblazing technology.
The sustainable focus of the loans opens favorable terms – DNB itself is driving for a goal of net zero emissions from its financing and investment activities by 2050, so is strategically focused on incentivizing the shift – but there are strict criteria for lenders to satisfy.
This, Huseby notes, is an essential part of the deal.
Verifying impact
“Transparency is key,” Huseby emphasizes. “It’s not enough to say you’re working toward sustainability; you need to show measurable results as part of a company’s overall sustainability and transition plan. That’s why we’ve built reporting requirements into the framework. It’s about building trust — with our clients, with investors, and with the public.”
Alongside the reporting, which will be verified by DNV to ensure quality and robustness of results, the product is classified as a “use of proceeds loan” whereby investments must be made in reducing emissions and, where possible, the “best available” technology to achieve this.
The potential applications for funds are wide ranging but include activities such as energy-efficient retrofits for existing vessels, investments in alternative, low or zero carbon fuel technologies, greener newbuilds, and services to decommission oil and gas infrastructure.
Incremental improvement
Huseby is keen to stress, in a big picture view extending far beyond any one financial product, that investments are needed in taking “practical, realistic and meaningful incremental steps today”, rather than waiting for “leaps forward” in new fuels.
He explains: “There’s a need to focus on the existing fleet, looking at how currently available, new technologies can increase efficiency, tackle emissions and also deliver commercial benefits. Transition financing fits well within this context, but it’s also about adopting the right mindset; the willingness to embrace innovation and start the sustainability journey.”
Huseby says he understands a degree of inaction on the “big fuel question” as there are so many competing options, presenting owners with a tricky nut to crack when it comes to assessing the most viable solutions for their fleets. This is further complicated by the competition for green fuels, with shipping forced to take its place in the queue for supply alongside every other transitioning sector.
“Which makes it all the more important to take whatever smaller, but still very meaningful, steps we can take now. We need to take a holistic view and act accordingly. Luckily, from DNB’s perspective, we have the privilege of working with globally leading, forward-thinking owners that are as committed to progress as we are. Working together we can have a strong collective impact on this major issue.”
Photo credit: DNB. Jan Ole Huseby, head of global ocean industries, DNB.
