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The shipping sector serves as a critical link in many global supply chains and as the foundation of intercontinental trade. More than 80 per cent of global trade by volume is carried by sea, according to the United Nations’ Conference on Trade and Development’s 2022 Review of Maritime Transport.
The International Energy Agency estimates the shipping industry was responsible for around 2.5 per cent of total energy sector emissions in 2020. In the IEA’s Net Zero Emissions (NZE 2050) pathway (October 2021), it is one of the few transport modes that won’t achieve net-zero emissions by 2050.
"The achievement of our 2030 targets for the shipping sector will require continual reductions in the absolute emissions of our customers’ shipping operations.”
This is partly due to the long lifetime of vessels (typically 25-35 years) and lack of available low-carbon options. Nevertheless, the NZE 2050 pathway assumes emissions will decline each year in the shipping sector.
Banks have an important role to play in supporting the transition to net zero emissions. The Paris Agreement recognises that provision of finance is consistent with a pathway towards low greenhouse gas emissions and climate-resilient development is one of the actions needed to respond to climate change. We are committed to transitioning our lending portfolio in line with the Paris Agreement.
In 2021 ANZ joined the Net-Zero Banking Alliance (NZBA) – an initiative bringing together a global group of banks – to help guide our efforts in steering financial flows towards the adoption of technologies and strategies which reduce greenhouse gas emissions. ANZ is progressively setting Paris-aligned pathways and targets for 2030 (or sooner) for certain sectors.
In this series, we will take a deeper look at these sectors, the pathways and targets we have set for each, and the potential challenges and opportunities along the way to achieving these targets. The information in this article should be read together with our Financed Emissions Methodology available.
It explains the methodologies we used to establish our emissions baselines and sectoral pathways or metrics, as well as our approach in setting our sectoral targets and the scenarios against which we have benchmarked those targets. Also note the important information at the end of this article about forward-looking statements, and the uncertainties, challenges and risks associated with climate-related information.
In 2023, ANZ set a 2030 target to reduce the absolute emissions of our shipping portfolio by 10 per cent (compared to a 2022 baseline).
The target covers Scope 1 and 3 emissions from fuel production, distribution and combustion from customer companies whose primary activity includes owning and operating domestic or international ocean-going vessels. ANZ has at least $10 million exposure at default at the end of our financial reporting year.
We selected this approach to align with the Science Based Targets initiative, to provide insight into how our lending is associated with supporting the achievement of real-world reduction in emissions, acknowledging the current lack of available emissions intensity data.
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In the short-term, the IEA identifies considerable potential for curbing fuel consumption in the shipping industry through measures to increase operational efficiency and improve energy efficiency. Such approaches include so-called slow steaming and the use of wind-assistance technologies.
In the longer term, the IEA expects significant emissions reductions to be achieved by switching to low-carbon fuels such as biofuels, hydrogen and ammonia.
Challenges and opportunities
A small number of customers from the shipping sector currently make up a material part of the overall emissions of ANZ’s decarbonisation pathway for shipping. We have begun, and will continue, to engage with shipping customers in our Large Emitters Engagement Program to support and encourage them to strengthen their low carbon transition plans.
The achievement of our 2030 targets for the shipping sector will require continual reductions in the absolute emissions of our customers’ shipping operations. However, as our customers work to improve their operational efficiency – retrofitting existing assets and switching to low-carbon fuels – we expect to see the absolute emissions of our portfolio decline, consistent with our 2030 target.
If the uptake of fuel switching or adoption of other measures to boost operational efficiency does not occur quickly enough, achieving our targets may become unlikely. However, were this to occur, we expect shipping scenarios would be adjusted to reflect a longer time horizon and we may update our pathway accordingly.
Each year, ANZ releases a range of reporting which seeks to help our investors, shareholders, customers, employees and communities better understand our approach to, and performance against, key ESG and climate-related initiatives.
Our 2023 Climate-related Financial Disclosures have been prepared in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations 2017. ANZ joined the Net-Zero Banking Alliance (NZBA) in 2021 and the information within the Climate-related Financial Disclosures sets out how we are taking action in line with this commitment.
The full suite of ANZ’s ESG and climate-related reporting, along with further detail about our approach to developing metrics, pathways and targets for our priority sectors, is available at anz.com/esgreport.
Kris Fumberger is Manager ESG Advisory at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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Stemming the tide on shipping emissions
2024-04-15
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EDITOR'S PICKS
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In this series, we take a deeper look at each of ANZ’s sectoral decarbonisation pathways to understand the role we play in supporting the transition to net zero.
2024-03-12 14:53