CBI Shipping Criteria – Background Paper
The Shipping Criteria for the
Climate Bonds Standard & Certification Scheme

September 2020

The Climate Bonds Initiative gratefully acknowledges the Technical and Industry Working Group
members who supported the development of these Criteria. Members are listed in Appendix 1.
Special thanks are given to Tristan Smith, and Sophie Parker from University College London,
who acted as the lead specialists coordinating the development of the Criteria through theTechnical Working Group, and to Adolf Ng, Mawuli Afenyo and Roozbeh Panahi from the
University of Manitoba, who were instrumental to the discussion on adaptation and resilience.
Proposals were agreed by the Technical Working Group, taking into account feedback from theIndustry Working Group.

0Definitions
Approved verifiers: Organisations approved by the Climate Bonds Initiative to provide assurance services toissuers of Certified Climate Bonds. The duties of approved verifiers include providing assurance that therequirements of the Climate Bonds Standard (including these and other sector specific Criteria) are met.
Climate Bonds Initiative (CBI): An investor-focused not-for-profit organisation, promoting large-scale
investments that will deliver a global low carbon and climate resilient economy. The Initiative seeks to develop
mechanisms to better align the interests of investors, industry and government so as to catalyse investments at
a speed and scale sufficient to avoid dangerous climate change.
Climate Bond: A Climate Bond is a bond used to finance – or re-finance - projects needed to address climatechange. They range from wind farms and hydropower plants, to rail transport and building sea walls in cities
threatened by rising sea levels. Only a small portion of these bonds have been labelled as green or climate bondsby their issuers.
Certified Climate Bond: A Climate Bond that is certified by the Climate Bonds Standard Board as meeting therequirements of the Climate Bonds Standard, as attested through independent verification.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify green
bonds where they can be confident that the funds are being used to deliver climate change solutions. This may
be through climate mitigation impact and/ or climate adaptation or resilience. The CBS is made up of two parts:
the parent standard (Climate Bonds Standard v.3) and a suite of sector specific eligibility Criteria. The parent
standard covers the certification process and pre- and post-issuance requirements for all certified bonds,
regardless of the nature of the capital projects. The Sector Criteria detail specific requirements for assets
identified as falling under that specific sector. The latest version of the CBS is published on the Climate Bonds
Initiative website
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34 trillionof assets under management. The CBSB is responsible for approving i) Revisions to the Climate Bonds Standard,
including the adoption of additional sector Criteria, ii) Approved verifiers, and iii) Applications for Certification ofa bond under the Climate Bonds Standard. The CBSB is constituted, appointed and supported in line with thegovernance arrangements and processes as published on the Climate Bonds Initiative website.
Climate Bond Certification: allows the issuer to use the Climate Bond Certification Mark in relation to that bond.
Climate Bond Certification is provided once the independent Climate Bonds Standard Board is satisfied the bondconforms with the Climate Bonds Standard.
Green Bond: A Green Bond is where proceeds are allocated to environmental projects. The term generally refers
to bonds that have been marketed as “Green”. In theory, Green Bonds proceeds could be used for a wide varietyof environmental projects, but in practice they have mostly been the same as Climate Bonds, with proceeds going
to climate change projects.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry andNGOs convened by the Climate Bonds Initiative. The TWG develops the Sector Criteria - detailed technical criteria
for the eligibility of projects and assets as well as guidance on the tracking of eligibility status during the term of
the bond. Their draft recommendations are refined through engagement with finance industry experts inconvened Industry Working Groups and through public consultation. Final approval of Sector Criteria is given by
the CBSB.
Industry Working Group (IWG): A group of key organisations that are potential issuers, verifiers and investors
convened by the Climate Bonds Initiative. The IWG provides feedback on the draft sector Criteria developed by
the TWG before they are released for public consultation
1

TABLE OF CONTENTS
1.

INTRODUCTION
1.1
1.2
1.3
1.4
1.5
1.6

2.

OVERVIEWFUNDING NEEDS OF A LOW-CARBON AND CLIMATE RESILIENT ECONOMY
ROLE OF BONDS
INTRODUCTION TO CLIMATE BONDS INITIATIVE AND THE CLIMATE BONDS STANDARD
PROCESS FOR SECTOR CRITERIA DEVELOPMENTREVISIONS TO THESE CRITERIASECTOR OVERVIEW
2.1
THE FUTURE OF SHIPPING
2.2
MITIGATION POTENTIAL AND GHG IMPACTS OF SHIPPING
2.2.1
General introduction to major policy developments at IMO and the European Union
2.3
IMPACT OF CLIMATE CHANGE ON SHIPPING AND ADAPTATION STRATEGIES
2.4
INVESTMENT NEED/HOW IS SHIPPING CURRENTLY FINANCED?
2.5
BONDS IN THE SECTOR

3.

PRINCIPLES AND BOUNDARIES OF THE CRITERIA
3.1
3.2
3.3
3.4

4.

GUIDING PRINCIPLESSCOPE OF THE CRITERIAEXAMPLES OF USE OF PROCEEDSEMISSIONS OUT OF SCOPEDISCUSSION AND ELIGIBILITY CRITERIA FOR THE SHIPPING SECTOR

3
3
3
4
4
5
5
6
6
6
11
12
12
14
15
15
15
16
17
18

4.1
OVERARCHING CONSIDERATIONS AND REQUIREMENTS FOR THE SHIPPING SECTOR
184.1.1
Adaptation and resilience requirements for the Shipping Sector
18
4.2
SPECIFICATION AND JUSTIFICATION OF MITIGATION REQUIREMENTS FOR THE SHIPPING SECTOR
18
4.2.1
Sector compatibility with a <2°C level of ambition
19
4.2.2
Metrics for assessing whether mitigation requirements are met
19
4.2.3
VERIFICATION OF DATA FROM IMO DCS AND EU MRV
21
4.2.4
Port infrastructure compatibility
21
4.3
CRITERIA FOR ASSESSING ASSET ELIGIBILITY WITH RESPECT TO MITIGATION REQUIREMENTS
21
4.3.1
Background on how assets can ensure compatibility with sector mitigation requirements, given
current levels of availability of technologies and associated energy/fuel sources.
22
4.3.2
Criteria for establishing eligibility at the point of bond issuance23
4.3.3
Procedure for monitoring eligibility over the period of the bond25
5. ADAPTATION & RESILIENCE PRINCIPLES

25

6. SUMMARY OF CRITERIA

27

APPENDIX 1: TWG AND IWG MEMBERS

29

APPENDIX 2: CARBON INTENSITY METRICS

30

APPENDIX 3: DECARBONISATION TRAJECTORIES32

APPENDIX 4: CBI CLIMATE RESILIENCE PRINCIPLES

38

CONSEQUENCE OF RISK FACTOR

39

SEVERITY OF EFFECT

39

LINGUISTIC GRADES FOR LIKELIHOOD39

APPENDIX 5: SUMMARY OF PUBLIC CONSULTATION

42

2

1. Introduction
1.1

Overview

This document provides a starting point for the development of Sector Criteria for the shipping industry under
the Climate Bonds Standard. The purpose of these Criteria will be to provide a succinct set of decision rules fordetermining when shipping projects and assets are compatible with a low carbon, climate resilient economy, andtherefore should be certified under the Climate Bonds Standard. The document’s aim is to give an overview of
the issues, which the Criteria’s Technical Working Group (TWG) and Industry Working Group (IWG) is likely tomeet in developing the Criteria.
The two main tasks of the TWG will be to draw up two sub-sets of Criteria: one for determining the mitigation
potential or low carbon status of the project or asset; and one for determining its resilience to climate impacts.
These criteria ideally need to provide an optimal balance between rigour, robustness and keeping the burden ofassessment low. The main task of the IWG will be to review these Criteria and provide feedback on the efficacy,
applicability, and appropriateness of the Criteria.
1.2

Funding needs of a low-carbon and climate resilient economy

The current trajectory of climate change is expected to lead to a global warming of 3.1-3.7°C above pre-industrial
levels by 21001, posing an enormous threat to the future of the world’s nations and economies. The effects ofclimate change and the risks associated with a greater than 2°C rise in global temperatures by the end of the
century are significant: rising sea levels, increased frequency and severity of hurricanes, droughts, wildfires andtyphoons, and changes in agricultural patterns and yields. Avoiding such catastrophic climate change requires adramatic reduction in global greenhouse gas emissions.
Meanwhile, the world is entering an age of unprecedented urbanisation and related infrastructure development.
Global infrastructure investment is expected to amount to USD 90 trillion over the next 15 years, which is morethan the entire current infrastructure stock.2
To ensure sustainable development and slow climate change, this infrastructure needs to be low-carbon andresilient to climate change, without compromising the kind of economic growth needed to improve thelivelihoods and wellbeing of the world’s most vulnerable citizens. Ensuring that the infrastructure built is lowcarbon is estimated to raise annual investment needs by 3–4% to USD 6.2 trillion.3 Climate adaptation needs add
another significant amount of investment, which is estimated at USD 280–500 billion per annum by 2050 for a
2°C scenario.4
According to the Task Force on Climate-related Financial Disclosures (TCFD), there are two broad channels
through which climate change can present risks to business activities and assets5:
Physical risk: the risk of impacts from climate- and weather-related events, such as floods and storms thatdamage property or disrupt supply chains and trade;
Transition risk: the financial risks that could result from the process of adjustment towards a lower-carbon
economy. These include sudden shifts in demand; legal risk due to parties who have suffered loss or damage
seeking compensation; and changes in policy favouring lower carbon technologies.
All of these could prompt a reassessment of the value of a large range of assets as costs and opportunities
become apparent, and widespread inadequate information on these risks could even threaten the stability of
1 According to Climate Tracker, under current policies we could expect 3.1-3.7°C: 2018. Temperatures: Addressing global warming. Accessed on
17.05.2018. Available from: http://climateactiontracker.org/global.html
2 The Global Commission on the Economy and Climate, 2016a. The Sustainable Infrastructure Imperative: Financing for Better Growth andDevelopment The 2016 New Climate Economy Report. (n.d.).
3 Ibid.
4 UNEP, 2016
5 TFCD. 2017. Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures. Accessed on 17.05.2018. Available from:https://www.fsb-tcfd.org/publications/final-recommendations-report/. Accessed on 04.06.2018.

3

the financial system. Risks to financial stability will be minimised if the transition begins early and follows apredictable path, thereby helping the market anticipate the transition to a 2°C world.
1.3

Role of bonds

Traditional sources of capital for infrastructure investment (governments and commercial banks) are insufficient
to meet capital requirement needs to 2030; institutional investors, particularly pension and sovereign wealthfunds, are increasingly looked to as viable actors to fill these financing gaps.
Capital markets enable issuers to tap into large pools of private capital from institutional investors. Bonds areappropriate investment vehicles for these investors as they are low-risk investments with long-term maturities(in comparison to equity investments in the same company for example), making them a good fit withinstitutional investors’ liabilities (e.g. pensions to be paid out in several decades).
Bond financing works well for low-carbon and climate-resilient infrastructure projects post-construction, as
capital markets also facilitate risk management. Across investors and financial markets, different entities facedifferent types and severities of risks related to climate change, depending on many factors including degree of
long-term exposure, likelihood of negative climate impacts, and ability to mitigate impacts or shift positions.
Bonds offer relatively stable and predictable returns and long-term maturities. This makes them a good fit withinstitutional investors’ investment needs. Labelled green bonds are bonds with proceeds used for green projects,
mostly climate change mitigation and/or adaptation projects, and labelled accordingly. The rapid growth of thelabelled green bond market has shown in practice that the bond markets provide a promising channel to financeclimate investments.
The green bond market can reward bond issuers and investors for sustainable investments that accelerate
progress toward a low carbon and climate resilient economy. Commonly used as long-term debt instruments,
green bonds are issued by governments, companies, municipalities, commercial and development banks tofinance or re-finance assets or activities with environmental benefits. Green bonds are in high demand and canhelp issuers attract new types of investors.
Green bonds are regular bonds with one distinguishing feature: proceeds are earmarked for projects withenvironmental benefits, primarily climate change mitigation and adaptation. A green label is a discovery
mechanism for investors. It enables the identification of climate-aligned investments with limited resources fordue diligence. By doings so, a green bond label reduces friction in the markets and facilitates growth in climatealigned investments.
However, currently green bonds only account for less than 0.2% of all bonds issued globally, whereas the global
bond market stands at USD 100 trillion. The potential for scaling up is tremendous. The market now needs togrow much bigger, and quickly.
1.4

Introduction to Climate Bonds Initiative and the Climate Bonds Standard

The Climate Bonds Initiative is an investor-focused not-for-profit organisation whose goal is to promote largescale investments through green bonds and other debt instruments to accelerate a global transition to a lowcarbon and climate-resilient economy.
Activating the mainstream debt capital markets to finance and refinance climate-aligned projects and assets is
critical to achieving international climate goals, and robust labelling of green bonds is a key requirement for thatmainstream participation. Confidence in the climate objectives and the use of funds intended to address climatechange is fundamental to the credibility of the role that green bonds play in a low carbon and climate resilient
economy. Trust in the green label and transparency to the underlying assets are essential for this market to reachscale but investor capacity to assess green credentials is limited, especially in the fast-paced bond market.
Therefore, the Climate Bonds Initiative created the Climate Bonds Standard & Certification Scheme, which aims
to provide the green bond market with the trust and assurance that it needs to achieve scale.
4The Climate Bonds Standard & Certification Scheme is an easy-to-use tool for investors and issuers to assist themin prioritising investments that truly contribute to addressing climate change, both from a resilience and a
mitigation point of view. It is made up of the overarching Climate Bonds Standard detailing management andreporting processes, and a set of Sector Criteria detailing the requirements assets must meet to be eligible forcertification. The Sector Criteria covers a range of sectors including solar energy, wind energy, marine renewableenergy, geothermal power, low carbon buildings, low carbon transport, forestry and water. The Certification
Scheme requires issuers to obtain independent verification, pre- and post-issuance, to ensure the bond meetsthe requirements of the Climate Bonds Standard.
1.5

Process for Sector Criteria Development

The Climate Bonds Standard has been developed based on public consultation, road testing, review by theassurance roundtable and expert support from experienced green bond market actors. The Standard is revisitedand amended on a regular basis in response to the growing green bond market. Sector specific Criteria, or
definitions of green, are developed by Technical Working Groups (TWGs), made up of scientists, engineers andtechnical specialists. Draft Criteria are presented to Industry Working Groups before being released for publiccomment. Finally, Criteria are presented to the Climate Bonds Standard Board for approval (see diagram below).

To date, Sector Criteria for wind, solar, geothermal, marine renewables, road transport, forestry, water andbuildings are available for certification. Sector Criteria for hydropower, bioenergy, fisheries, waste management,
agriculture, and shipping are under development. Working groups for energy distribution & management, ICT
and industrial energy efficiency will be launched soon.
1.6

Revisions to these Criteria

These Criteria will be reviewed two years after launch, or potentially earlier if the need arises, at which point the
TWG will take stock of issuance that arises in the early stages and any developments in improved methodologies
and data that can increase the climate integrity of future bond issuances. After the first review, the Criteria will
be reviewed again periodically on a needs basis as technology and the market evolves. As a result, the Criteria
are likely to be refined over time, as more information becomes available. However, certification will not be
withdrawn retroactively from bonds certified under earlier versions of the Criteria.

52. Sector Overview
Shipping is defined as maritime transport of cargo and passengers in international and domestic waters. This
does not include military or fishing vessels.6 International shipping is between ports of different countries,
whereas domestic shipping is shipping between ports of the same country. By this definition, the same ship may
frequently be engaged in both international and domestic shipping operations. This definition is consistent with
the IPCC 2006 Guidelines (Second IMO GHG Study 2009).
Despite significant climate impacts arising from international shipping, domestic shipping is nonethelessimportant, and the decarbonization of domestic shipping may vary depending on how an individual country’s
decarbonization plans prioritise this sector. However, overall guidance can still be taken from these criteria.
Global economic activity is the primary driver of international demand for shipping. Maritime transport accounts
for approximately 80% of global trade by volume, and 70% by value. In 2017, total volumes transported reached10.7 billion tons. The UN Conference on Trade and Development (UNCTAD) is forecasting a 3.8 per centCompound Average Growth Rate (CAGR) for seaborne trade between 2018 and 2023.
The world’s global shipping fleet is growing to meet this demand. In 2017, 42 million gross tons were added to
global shipping fleet tonnage following an increase in new deliveries and decline in demolition activity.7 Despite
this growth, the UNCTAD also anticipates various political risks and disruptions to the industry including thelooming trade tensions between the United States of America and China, Canada, Mexico and the European
Union.
The shipping industry is characterized by ship owners, operators, freight forwarders, shipping customers,
maritime services, charterers, ports and terminal infrastructure, corporate services, and manufacturers. In termsof market characteristics, the industry is concentrated around a relatively small number of actors, despite its
global impact. The top five ship-owning countries (Greece, Japan, China, Germany and Singapore) account foralmost 50% of the world fleet in dead-weight tonnage. The top ten cargo carriers hold a combined market shareof 68.6% and operate approximately 35% of the world’s fleet.8
2.1 The Future of Shipping
The future of the maritime industry remains unclear, but industry leaders have an opportunity to define whatthat future looks like for themselves. The digitization of the shipping sector offers immense growth andinnovation potential. Autonomous shipping and blockchain technology are showing considerable promise forapplication within the shipping industry and the industry is constantly seeking new ways to apply technologicaladvances and adapt to a changing world. In particular, the Global Maritime Issues Monitor 2018 identified ‘bigdata’ as having the highest potential impact and likelihood of occurring over the next ten years.9
The shipping industry has also recognised that climate change is emerging as a major threat to operations andprofitability. More intense storms, rising sea levels and changing shipping routes will force the industry tounderstand and raise awareness of climate risk and demonstrate the opportunities in taking leadership andaction. This will be discussed in more detail in Section 2.4.
2.2 Mitigation Potential and GHG Impacts of Shipping
While shipping is the lowest emitting for of transport, especially for international/trans-continental shipping,decarbonisation of the shipping sector will remain crucial to meeting international commitments to mitigatingclimate change. According to the International Maritime Organisation (IMO), the shipping industry’s governing
6 International Maritime Organization, 2014. Third IMO GHG Study. Available at:
http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Documents/Third%20Greenhouse%20Gas%20Study/GHG3%20Ex
ecutive%20Summary%20and%20Report.pdf
7 https://unctad.org/en/PublicationsLibrary/rmt2018_en.pdf
8 Ibid.
9 https://www.globalmaritimeforum.org/content/2018/10/Global-Maritime-Issues-Monitor-2018.pdf

6body, the sector currently accounts for approximately 2.2% of global emissions. Left unchecked, shipping
emissions are expected to grow by 50-250% by 2050.10
CO2 is the largest component of greenhouse gas emissions in shipping (98%). The multi-year average estimate
for all shipping for 2007–2012 was 1,015 million tonnes CO2 and 1,036 million tonnes CO2e for GHGs combining
CO2, CH4 (methane) and N2O (nitrous oxide).11
However, methane (CH4) emissions from ships increased over this period (particularly over 2009–2012) due toincreased shipping activity associated with the transport of gaseous cargoes by liquefied gas tankers due tomethane slip. There is a risk of this trend continuing in the future if shipping moves to LNG-powered ships.
There is however, potential for the sector to make significant GHG reductions. These can be achieved through a
combination of:- Increasing the energy efficiency of shipping- Reducing the GHG intensity of the energy used by ships
The former can be achieved by technologies and operational interventions. Examples of technologies include
equipment which can improve the hull’s efficiency, the propulsion efficiency, or the efficiency of the machinery
used to convert fuel into propulsive or auxiliary power (e.g. the engine). Operational interventions include
reduction or optimisation of speed, maintenance programmes on hull coatings and machinery, trim and draught
management, as well as fleet wide strategies enabling just in time arrival at ports.
However, while the potential for significant GHG reduction from efficiency gains is important, it is ultimately
limited and will not enable significant decarbonisation in its own right. We also recognise that refrigerated
container units (reefers) are used extensively across the shipping sector and present a substantial opportunity
to reduce emissions due to increased energy consumption for cooling and leakage of refrigerant. This technology
segment intersects with various transport modalities (including road freight and rail). The present criteria do notprovide guidance on measuring or certifying the contribution of improvements to reefer performance, but theneed for further work in this segment is recognised.
Table 1 outlines for an example ship type (a Medium Range Tanker), the carbon intensity values as a result ofvarying speed, the use of energy efficiency technologies and the adoption of lower carbon fuels (i.e., a 50% and
75% lower carbon factor than current fuels) relative to the baseline specification.
For example, applying a speed reduction from the baseline of 12.8 knots to 11.3 knots results in an intensity
value that is 80% of the baseline value, or a 20% reduction in carbon intensity. Speed reductions and energy
efficiency technology in combination with wind propulsion could only reduce carbon intensity by between 30%
and 70% relative to the 2010 baseline design and operational specification (shown in yellow).
To achieve such a reduction requires a large reduction in operating speed which could be undesirable forcommercial and operational reasons. Significant further reductions beyond 70%, including at higher operating
speeds closer to those used today, are only achievable when use of lower carbon factor fuels was explored(shown in green).

10 International Maritime Organization, 2014. Third IMO GHG Study. Available online.
11 Ibid.

7

Table 1: Energy Efficiency Operational Indicator (EEOI)12 value indexed to the baseline, 2010 specification,
taking into account potential impacts due to technology, operation and energy/fuel choices for a Medium
Range tanker13

Note: Table 1 serves only to illustrate the impacts of technology, operation and fuel choices on a vessel’s EEOI,
the reference to a Medium Range tanker is illustrative but does not negate the categorical exclusion of
dedicated fossil fuel carriers.
Therefore, in addition to increasing efficiency, the sector will need to switch to energy and fuel which produces
lower GHG emissions when used on board. Options include:- Harvesting of renewable energy on board (wind propulsion, solar, wave)- Advanced Bioenergy14- Battery energy storage- Synthetic or e-fuels (sometimes also called power-to-liquid or power-to-gas), made from renewableelectricity or fossil fuel sources in combination with CCS
These options are at varying levels of readiness and use. For example, solar has been in use for supplementing
auxiliary power for some time. Wind assistance technologies have been in use for some time on several sea goingships, as has battery energy storage and biofuel. Some of these options have yet to be deployed for deep-sea
shipping operations (for example bioenergy and synthetic/e-fuels) but are already deployed and in operation for
short sea shipping. Their application for deep sea shipping use is the subject of intense Research, Design andDevelopment (RD&D) efforts, and their potential availability is expected over the coming decade.
Figure 1 describes potential scenarios of how the energy demand in shipping could progress from 2010 (thebaseline year15 used to express the performance of the current fleet) to 2050. The predominate fuel mix in 2010
was Heavy Fuel Oil (HFO) and Marine Diesel Oil (MDO), both fossil fuels.
As well as cost-effective use of all available energy efficiency opportunities, the scenarios describe significant
growth in biofuel and hydrogen energy use. In both scenarios significant rates of operational GHG emission
12 EEOI is one of the possible metrics to be used for setting the CBI Criteria. The choice of metric will be discussed in Chapter 4.
13 IMO ISWG-GHG-1 INF.2 – A scientific study on possible reduction targets and their associated pathways.
14 As defined in the EU Renewable Energy Directive Recast II
15 A standard baseline year of 2010 is used because of historical data available from the Third IMO GHG Study.

8reduction, such that scenario 4 (left) achieves nearly 100% emission reduction by 2050, and scenario 5 (right)
achieves approximately 50% emission reduction by 2050 (both on 2010 baseline). Other scenarios and analyses
see different fuel mixes and different fuels could compete to dominate the future shipping energy demand (e.g.
ammonia, e-methanol), but the basic principle remains: that the fleet will need to rapidly move away from fossil
fuel use to low and zero GHG emission alternatives.
Figure 1: the penetration of different fuels in the aggregated energy demand for international shipping, overthe period 2010-205016

In order to drive these changes the IMO, April 2018, committed to reducing emissions generated by shipping
activity, which represented a significant shift in climate ambition for a sector that currently accounts for 2-3% of
global carbon dioxide emissions. This Initial Strategy by the IMO sets out three objectives.17 The first objective is
specifically related to the design efficiency improvements of newbuild ships. The latter two require emission
reduction targets on an absolute and also on a relative basis.
The IMO’s absolute reduction target requires GHG emissions from international shipping fleets in aggregate topeak as soon as possible and to reduce by at least 50% by 2050 compared to 2008 whilst pursuing efforts towards
phasing them out.18 This implies that the shape of Figure 2 shows the lower bound (50% reduction), middle
reduction scenario (70% reduction) and upper bound (100% reduction).
Figure 2: The Global Shipping fleet’s absolute CO2 targets and trajectories

16 IMO ISWG-GHG-1 INF.2 – A scientific study on possible reduction targets and their associated pathways.
http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Documents/ISWG-GHG%201-2.pdf
17 In April 2018, MEPC 72 adopted resolution MEPC.304(72) on the Initial IMO Strategy on reduction of GHG emissions from ships (the Initial
Strategy). This important agreement represents the framework for further action of the Committee, setting out the future vision for international
shipping. The Initial Strategy envisages for the first time a reduction in total GHG emissions from international shipping which, it says, should peak assoon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts
towards phasing them out entirely. IMO Member States agreed to keep this Strategy under review, including adoption of a Revised Strategy in 2023.
18 IMO (2018). Resolution MEPC.304 (72) (adopted on 13 April 2018), Initial IMO strategy on reduction of GHG emissions from ships, IMO doc MEPC
72/17/Add. 1, Annex 11.

9

The IMO’s third, relative emissions target, or carbon intensity19 aims to reduce carbon intensity by at least 40%
by 2030 based on 2008 levels but should pursue efforts towards 70% by 2050.20
However, the at least 40% and at least 70% intensity targets were set prior to the determination of the at least
50% absolute reduction goal. Depending on future demand for shipping services, the IMO’s absolute and relative
targets (See: Figure 1 and Figure 2) may or may not align. However, alignment is unlikely. The wording of theInitial Strategy does not state that meeting a 40% reduction in intensity by 2030 and 70% by 2050 ensurescompliance with the absolute reduction goal. To address this, it is expected that the IMO will update intensity
targets to better align with absolute targets at the forthcoming review process for the IMO’s Initial GHG Strategy.
Reduction targets in the Strategy use 2008 as the baseline year because this is the agreed baseline from the IMO.
Nations pledged in the 2015 Paris Agreement “to achieve a balance between anthropogenic emissions by sources
and removals by sinks of greenhouse gases in the second half of this century”. This means getting to “net zero
emissions” between 2050 and 2100. 2050 therefore represents a key milestone in the Paris Agreement, which
the IMO explicitly references in its Strategy.21
The Strategy does not alone secure 1.5⁰C nor clearly show that efforts have been pursued to achieve this. The
Strategy increases the possibility of being able to keep global average temperature increases within this limit.
Immediate measures to implement the Strategy will be required to urgently peak and reduce GHG emissions inline with 1.5⁰C.
Critical to the viability of 1.5⁰C is whether the Strategy is converted into significant GHG reductions before 2023,
and this is dependent on the outcome of future IMO meetings and their ability to agree and then rapidly deploy
policy measures.
Figure 3: International Shipping’s Share of IEA “Below 2 Degrees” Net Emissions, calculations by UMAS

Figure 3 shows International Shipping’s share of net emissions in the IEA’s “Below 2 Degrees”22 scenario indifferent reduction scenarios compared to the Business-As-Usual (BAU) pathway. The IMO Strategy’s 50%
absolute emissions reduction (the lower bound on reduction ambition) represents a ~10% share of net emissions
by 2050 in this scenario, well above international Shipping’s historical share of emissions (2-3%).

19 Carbon intensity is defined as the amount of CO2 emitted to provide 1 unit of transport work (typically measured in tonne-nautical miles).
20 [Placeholder for IMO Strategy Ref]
21 IMO, MEPC.304(72), 2018.
22 The IEA’s “Below 2 Degrees” represents a 1.75° pathway.

10Moreover, substantial CO2 cuts are needed before 2030 across the transport sector, including shipping, to get
the world on track to achieve the IPCC’s 1.5°C goal. Short-term measures for shipping must therefore be
implemented before 2023. This will require operational energy efficiency measures, such as speed reduction andthe implementation of operational efficiency standards. In order to be aligned with 1.5°C, the sector would
require 100% GHG reduction by 2050.
2.2.1

General introduction to major policy developments at IMO and the European Union

CBI recognizes that both the EU and the IMO have made significant strides towards developing and standardising
the metrics and data necessary to transition the shipping sector towards a low-carbon trajectory. These metrics
are briefly outlined in this section but will be discussed in further detail in section 4.2
The Energy Efficiency Design Index (EEDI) was made mandatory for new ships and the Ship Energy Efficiency
Management Plan (SEEMP) for all ships at the IMO’s Marine Environment Protection Committee (MEPC) 62, on
July 2011, with the adoption of amendments to the International Convention for the Prevention of Pollution from
Ships (MARPOL) Annex VI (resolution MEPC.203(62)), by Parties to MARPOL Annex VI.
This was the first legally binding climate change treaty to be adopted since the Kyoto Protocol. Since thisbreakthrough MEPC 63 (March 2012) adopted four important guidelines (resolutions MEPC.212(63),
MEPC.213(63), MEPC.214(63) and MEPC.215(63)) aimed at assisting the implementation of the mandatory
regulations on Energy Efficiency for Ships in MARPOL Annex VI.23
The EEDI for new ships is the most important technical measure and it aims at promoting the use of more energy
efficient (less polluting) equipment and engines. The EEDI requires a minimum energy efficiency level per
capacity mile (e.g. tonne mile) for different ship type and size segments. From 1 January 2015, following an initial
two-year phase zero when new ship design will need to meet the reference level for their ship type, the level isto be tightened incrementally every five years, and so the EEDI is expected to stimulate continued innovationand technical development of all the components influencing the fuel efficiency of a ship from its design phase.
The SEEMP is an operational measure that establishes a mechanism to improve the energy efficiency of a ship ina cost-effective manner. The SEEMP also provides an approach for shipping companies to manage ship and fleet
efficiency performance over time using, for example, the Energy Efficiency Operational Indicator (EEOI) as amonitoring tool.
The Data Collection System (DCS) defines the data that the IMO has mandated that all shipowners will be
required to report. The DCS is a new policy that entered into force in March 2018. The current specification of
the DCS requires shipowners to collect and report to IMO, per calendar year, the following data for any vessels
in their fleet which are 5,000 gross tonnage and above:
1.
The amount of fuel consumption for each type of fuel2.
Distance travelled
3.
Design deadweight used as cargo proxy4.
Hours underway
The first data collection period is for the calendar year 2019. Prior to reporting to the IMO, the data must be
verified by a Recognised Organisation (RO). Once data have been verified, a Statement of Compliance (SoC) is
generated (by May 2020 for calendar year 2019 data). Verified data need to be transferred to the IMO’s databaseby June 2020. The data reported to the IMO are confidential and it is uncertain how the data will be used, but it
could be provided upon consent of the shipowner to a third party such as a lender.
In April 2015, the European Parliament and the European Council adopted the Regulation (EU) 2015/757 on themonitoring, reporting and verification of CO2 emissions from maritime transport ("the EU MRV Regulation”). This
EU regulation is an important milestone to collect robust and verified CO2 emission data from ships operating in
the European Economic Area (EEA). The Regulation applies to ships above 5,000 gross tonnage in respect of CO2
emissions released during their voyages from their last port of call to a port of call under the jurisdiction of an
23 https://www.marpol-annex-vi.com/eedi-seemp/

11

EU Member State and from a port of call under the jurisdiction of a EU Member State to their next port of call,as well as within ports of call under the jurisdiction of an EU Member State.
The data collected includes the CO2 emissions per distance travelled and cargo carried on voyages (or CO2
emissions divided by transport work, which is measured by deadweight tonnage and distance travelled). A
document of compliance is issued to a company by a verifier, which confirms that that the ship has compliedwith the requirements of this Regulation for a specific reporting period.
Both the EU’s monitoring, reporting and verification (MRV) regulation and the IMO data collection system (DCS)
are based on collecting and analysing fuel consumption data; however, there are important differences in thetypes of information that is needed, the submission deadlines and the responsible authorities. The key differenceis that transport work data is collected under the EU MRV scheme, whereas IMO DCS collects deadweight
tonnage (DWT) and total distance travelled, the product of which is a proxy for transport work.
2.3 Impact of Climate Change on Shipping and Adaptation Strategies
The effects of climate change on the shipping industry will be felt at sea and onshore. Changes in sea-level,temperature, humidity, salinity, precipitation, extreme weather, floods, increased fog and other climatic eventsare likely to affect ports and shipping routes as well as connecting transport infrastructure and the global networkof supply-chains. The potential for damages, delays and disruptions across closely linked global supply chainsmeans that addressing the impact of climate change on key transport infrastructure is of strategic economic
importance.
Ports are particularly susceptible to climate change risks. There are over 3,700 maritime ports around the world
enabling global and local commerce, 60% of the goods loaded and 63% of the goods unloaded at these ports are
in developing countries.24 As sea levels rise, there are obvious risks for coastal areas and coastal infrastructure.
Potential investments in these areas are also a focal point for our Adaptation and Resilience Expert Group (AREG).
The supporting infrastructure for decarbonising the shipping sector may require additional guidance on
adaptation and resilience.
It is uncertain how climate change will impact the environmental conditions encountered by ocean-going vessels.
Changes in wave heights and wind speeds and ocean current patterns may impact regulations on ship designs
and other structure designs. Structural failure may result in loss of human life, environmental damages andeconomic disruptions. In addition to changing wave and wind patterns, climate change will contribute to changes
in the pH level of oceans and their marine ecosystems which in turn could contribute to changes in hull condition
rates of deterioration and potentially also marine growth on ships.25
2.4 Investment need/how is shipping currently financed?
Shipping is amongst the most capital-intensive industries. It utilises assets with high commercial value, and debt
typically accounts for a large share in the capital structure of a shipping business. Between 2005 and 2017, over
$1.5 trillion was invested in newbuild vessels, with contracting reaching $263 billion during the cycle peak of
2007.26 Meeting this debt requires access to substantial amounts of capital to replace ageing vessels with new,more efficient and environmentally friendly ones. Bank debt remains the shipping industry’s primary source offunding, but ship owners are also looking towards other financing sources, including bonds, convertible debt,
capital and operating leases and preferred equity structures.27
Financial institutions, equity investors and shipowners face the risk of their assets becoming devalued due toeither a carbon price and/or a switch to more expensive but lower GHG emitting fuels. Additional capital is
24 https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1949&Sitemap_x0020_Taxonomy=UNCTAD%20Home;#1721;#Transport;#2197;#Transport,%20Climate%20Change%20Impacts%20and%20Adaptation;#1788;#Transport%20Policy%20and%20Legislation;#2170;#Transport,%20Climate%20Change%20and%20Maritime%20Transport
25 Bitner-Gregersen, E. (2013). Ship and offshore structure design in climate change perspective (SpringerBriefs in climate studies). Berlin; New York:
Springer.
26 Alexandridis, Kavussanos, Kim, Tsouknidis, & Visvikis. (2018). A survey of shipping finance research: Setting the future research
agenda. Transportation Research Part E, 115, 164-212.
27 http://www.nortonrosefulbright.com/knowledge/publications/158513/trends-in-ship-finance12needed to finance clean tech in the industry, which could be filled by climate bonds which target specifictechnologies. Figure 4 characterises shipping stakeholders according to their market exposure. Stakeholders
include financial institutions, private equity investors, shipowners, operators and charterers. Bank lending (shipmortgage and corporate debt) is the largest source of financing in shipping. The top 40 banks lent around $400bn
in 2017. Traditional banks are increasingly providing advice for clients on capital market products and placementswith less emphasis on direct bank debt lending, following the financial crisis in 2008. Debt capital markets
represent a much smaller portion ($7bn), but the bond market has been growing as shipping companies look forother sources of capital to fund shipping assets.
Figure 4. Stakeholder Exposure Model

Figure 5: Supplemental description of shipping stakeholders and their respective exposure to bunkering costand asset value risks for Figure 4 above.

13

It is important to characterise different investment needs or risks for stakeholders. Finance and risk can be
categorised using the characterisation from Figure 5, under the following headings:
Financial institutions: focused on asset valuation risk and/or cashflow depending on the finance product, asset
class, owner credit etc.
Asset heavy (Shipowners and shipping investors): have at least four considerations in their business model – i)
Cyclical risk, ii) charter parties and periods, iii) financial leverage, iv) residual values. All ship investors will besomewhere on a scale between having strong asset value focus (asset players) and, at the other end, firmly
focused on maximising operational profitability where the asset is seen only as a capital cost (with some residual
value risk). Generally speaking, the shorter the investment horizon, the more focused on asset value an investor
will be, where someone focused on operating returns will have a longer investment horizon or a blended
approach; timing investments with cycles and covering cargo commitments. Short term investors (3-5 yrs) will
generally want a positive cashflow and wish to reduce operational risk, so are more likely to fix period deals
which provide greater visibility.
Asset light (operators and charterers): will be somewhere on a scale between being focused on generating
return through beating ‘the market’ (for example a trader with a long view might think of taking ships in on long
period to cover his cargo position, and mark to market his/her position, benchmarking against the spot market
or vice versa) and at the other end of the scale, return through providing a value added service such as the portionof a carrier’s fleet that is chartered-in (hired), where ships are chartered to maintain a liner route.
Shipping transportation services are typically either provided directly by the shipowner (known as voyage or spot
charter) or on a time-charter. In a time-charter, the cargo owner leases the ship for a period of time – either fora single voyage or a longer period of time. Under this contractual arrangement, the cargo owner pays for the fuelcosts while the shipowner retains ownership responsibility (e.g., maintenance, investment in new technologies).
Shipowners which operate predominantly in the spot market28 (e.g., tankers) face direct exposure to the voyage
fuel cost and fuel efficiency improvement, while shipowners that operate in markets which are predominantly
time-charter (e.g., bulk shipping) are less incentivised to invest in fuel efficiency improvements because they are
not always rewarded through a higher time charter rate.
2.5 Bonds in the Sector
Green bonds have begun to debut in the shipping sector. In 2018, green bonds were issued by Nippon Yusen
Kaisha (NYK) and Mitsui OSK Lines (MOL). Proceeds from NYK’s first green bond will be used to finance andrefinance LNG-fuelled ships, LNG-bunkering ships, ballast water management systems and SOx scrubber systems.
NYK also took a green loan to support investments in methanol-fuelled ships. The project is positioned as part of
the research for future fuel conversion of ships.
As with NYK’s first green bond, proceeds from MOL’s bond will finance and refinance LNG-fuelled ships, LNGbunkering ships, ballast water management systems and SOx scrubber systems. Under its Green Bond
Framework, NYK and MOL have committed to ensure the financed vessels will not be used to transport productsthat relate to high fossil-fuel and resource intensive industries including, but not limited to, coal, tar sands andoil shale.
Climate Bonds commented on both issuances stating that switching to LNG-fuelled vessels is not enough tocomply with a 2°C decarbonisation trajectory in the long-run. However, the projects financed by the deals are
currently the lowest-emission asset option until other renewable fuels become commercially viable. It is
nonetheless important to ensure the vessel design is flexible enough to avoid fossil fuel lock-ins in the future.
There is a need for clear guidelines defining whether an asset is compatible with the reductions required to meetclimate targets over the lifetime of the asset. This paper provides these climate compatibility guidelines.

28 The spot market is where financial instruments, such as commodities, currencies and securities, are traded for immediate delivery. Delivery is theexchange of cash for the financial instrument.

14

3. Principles and Boundaries of the Criteria
3.1 Guiding Principles
The Climate Bonds Standard needs to ensure that the Shipping assets and projects included in Certified Climate
Bonds deliver on GHG mitigation potential and climate resilience benefits and are in line with best available
scientific knowledge and compatible with the goals of the Paris Agreement. At the same time, the Shipping
Criteria need to be pragmatic and readily usable by stakeholders in the market, to maximise engagement anduse. High transaction costs run the risk of reducing uptake of a Standard in the green bond market. Keeping thecosts of assessment down while maintaining robust implementation of the criteria is important. Table 2 sets out
the principles guiding the development of the Shipping Sector Criteria to meet and balance between these twogoals.
Table 2: Key principles for the design of the Climate Bond Standard Shipping Criteria
Principle

Requirement for the Criteria

Level of ambition

Compatible with meeting the objective of keeping global warming well below 2° C
above pre-industrial levels set by the Paris Agreement, and with a rapid transition toa low carbon and climate resilient economy.

Robust system

Scientifically robust to maintain the credibility of the Climate Bond Standard.

“Do not reinvent the wheel”

Harness existing robust, credible tools, methodologies, standards and data to assess
the low carbon and climate resilient credentials of any technology, endorsed bymultiple stakeholders where possible.

Level playing field

No discrimination against certain groups or geographies.

Multi-stakeholder support

Supported by key stakeholders; those within the relevant industry, the financial
community and broader civil society.

Continuous improvement

Subject to an evolving development process with the aim of driving continuous
improvement and credibility in the green bond market.

3.2 Scope of the Criteria
The Climate-aligned Shipping Criteria are designed to apply to wide range of ships, provided that issuers are able
to provide either the EEOI or Annual Efficiency Ratio (AER) data of the vessels on which the proceeds of a bondwill be used or, in the event this is not available (below), evidence that no fossil fuel has been used in the vessel’soperation.
With that in mind, it is important to note that only certain types of ships are within the scope of the EEOI and
AER data systems. The EU MRV regulation applies to ships above 5000 GT trading on voyages that include ports
within the EU Member States (MS). It excludes warships, naval auxiliaries, fish-catching or processing ships,
wooden ships of a primitive build, ships not propelled by mechanical means, or government ships use for noncommercial purposes. The IMO DCS applies to ships of 5000 GT or above performing international voyages. Ships
smaller than these size limits including those engaged on domestic voyages are only eligible for certification if
they do not use fossil fuel in their operation (e.g. they use batteries, hydrogen or other fuels), and so do not need
to be monitored for their compliance with a decarbonisation trajectory.
Furthermore, as is consistent with the CBI Standard and Certification Scheme’s other sector criteria, assets which
are dedicated to supporting the fossil fuel sector are not within scope. This includes dedicated fossil fuel carriers
and platforms associated with the extraction of fossil fuels, such as LNG carriers and Crude Carriers. Following
the public consultation, this exclusion has also been extended to dry bulk carriers that are transporting fossil fuel.
Globally, approximately 1.21 billion metric tons of coal is transported annually, this constitutes approximately
25% of global bulk cargo. We recognise that left unchecked, there is a significant risk that a Certified green bondwould be used to finance a dry bulk carrier that is used to transport coal. Thus issuers who include dry bulk
15

vessels within their green bond frameworks are required to show that the vessel(s), are not primarily transporting
fossil fuels during the life of the bond.
This means that for bonds where proceeds will be used for dry bulk carriers, issuers must show that (a) coal did
not constitute more than 25% of dry bulk by tons carried by the firm over the previous 3 years, based on the billsof lading, and (b) the volume of coal transported by the vessel does not exceed the declining threshold forallowable coal carried. This threshold follows a geometric decay model starting at 25% in 2020, decreasing at
5.3% per year as consistent with the International Energy Agency’s (IEA) Sustainable Development Scenario (SDS),
and is based on the bills of lading.
These criteria use 25% of tons loaded as the starting point for the threshold in 2020 because it reflects coal’s
absolute proportion of tons of cargo moved, and so any firms that are ship proportionally more coal than theoverall industry average are logically, harming climate change mitigation efforts. This upper limit is tightened ata pace concomitant with the IEA SDS, which requires that coal-fired generation without CCUS decrease 5.3% peryear to 2030.
These criteria also recognize the importance of decarbonizing the luxury travel industry in particular, cruise liners.
The TWG/IWG have not taken a view on whether cruise ships should categorically be excluded from the criteria,
and the criteria will apply to these assets, but this may be change when the Shipping criteria are reviewed.
Certifications awarded against such assets before a decision is made will not be revoked retroactively.
These criteria also recognize the importance of certain shipping sector-related assets which will not be coveredby the EEOI or AER data regimes but can still provide a significant contribution to decarbonization of the shipping
sector as a whole. In particular, refueling infrastructure that is dedicated to the delivery of electricity and eligible
types of fuel are also within the scope of these criteria.
Recognizing that there are assets which can contribute significantly to enabling the decarbonization of theeconomy, specifically Wind Turbine Installation Vessels (WTIVs) and Jack-up Rigs which are dedicated to theinstallation and maintenance of offshore electricity production technology.29 Given that these assets are criticalto ‘enabling’ an activity (production of offshore wind energy) that fully provides a substantial contribution to
fulfilling the Paris Agreement, it was determined that such assets should be considered as ‘within scope’ of theoffshore renewable energy criteria. More information about this is available in the marine renewable energy
criteria documentation on CBI’s website.30
3.3 Examples of Use of Proceeds
Table 3 provides an overview of the key assets and technologies which could be considered for evaluation. This
is not a prescriptive list - CBI’s criteria are technology neutral. Rather, it is intended to provide the reader with
examples of technological investments that can be made to bring a ship within the threshold that was developed
over the course of the TWG and IWG discussions.

29 In this particular case, “dedicated” means the asset is to be used only for the purposes of installation and operation of offshore wind energy
facilities and nothing else. Assets used in sectors other than marine renewable energy or for purposes other than installation and operation are noteligible.
30 For Certification of WTIVs or Jack-up Rigs dedicated to the installation and operation of offshore wind energy assets, during pre-Certification,verifiers should ascertain that the vessel will be used solely for the installation, operation, maintenance or decommissioning of renewable energy
assets. Those assets that are used in other sectors (e.g. Oil and Gas industry) are not eligible. If this is not available before issuance, then verifiersmust ensure on an annual, post-issuance reporting basis, that the asset(s) have only been leased or operated for offshore wind energy
installation/operation. This can be done through verification of receipts or accounts payable, against the overall revenue earned attributed to theasset. For more information please see the documentation on the Marine Renewable Energy criteria:
https://www.climatebonds.net/standard/marine

16

Table 3: Overview of key assets and technologies in the shipping sector
Assets
Ships which include
technologies that
increase a ship’s
energy efficiency
and/or reduce GHG
emissionsShips that use
technologies thatenable a switchfrom the use offossil fuel, or thecapturing of
exhaust emissions

Infrastructure thatenables the supply
of non-fossil
fuel/energy to aship, or the transfer
and transport ofcaptured emissions
from a ship
Programmes thatenable reductions
in carbonequivalent intensity
for an existing shipor fleet of ships

Description
To include ships featuring one or more of the following technologies:● Main machinery improvements: e.g. engine derating, hybridisation, waste-heatrecovery● Hull improvements: e.g. air lubrications, coatings, bulbous bow● Propulsion improvements: e.g. ducts, vane wheels, pods, advanced propellers● Auxiliary machinery efficiency improvements: e.g. cargo handling equipment,
lighting, pumps and fans
● Fuel or cargo storage improvements e.g. to reduce GHG emissions from fuel orcargo
To include ships featuring one or more of the following technologies:● Main aux. machinery and boilers for use with alternative (non-fossil) fuels e.g.
machinery (internal combustion or fuel cell) for use with non-fossil fuel● Fuel storage and handling e.g. non-fossil fuel storage and handling equipment● Electrification for use in conjunction with a source of low carbon electricity e.g.
propulsion electrification, auxiliary electrification, shore power adaptation,batteries● Onboard renewable energy e.g. wind assistance technologies, solar power, shaft
regeneration● Ships which feature technologies to capture and store GHG exhaust emissions on
board
To include infrastructure which enables one or more of:● Supply of non-fossil fuel/energy in the port (e.g. local battery storage, gridconnection, fuel production technologies, fuel storage facilities), in conjunction witha source of low carbon energy● Supply of non-fossil fuel/energy from the shore to the ship (e.g. shore power
connection infrastructure, bunkering infrastructure including bunker barges), in
conjunction with a source of low carbon energy● Infrastructure to transfer and transport captured emissions from the ship foronwards sequestration
To include:● Retrofit programmes that reduce the carbon-equivalent intensity of an existing shipor fleet of existing ships, either through significant efficiency improvement or
through enabling a switch from the use of fossil fuel● Programmes to enable an operational or behaviour change that can increase energy
efficiency e.g. fleet or port-based initiatives such as speed management, just in time
arrival, energy use optimisation, reefer container upgrading

3.4 Emissions out of Scope
The shipping criteria have been developed with an intentional focus on the operational emissions of the shipping
industry – those from the exhaust of ships in operation. That is not because non-operational emissions (forexample upstream emissions from energy production, or embodied emissions associated with manufacture anddisposal) are not considered important. However, for practical reasons it is not deemed feasible for an issuer tomanage the upstream or embedded emissions of an asset at point of bond issuance.
As a result, the shipping criteria are based on inclusion in scope of assets that are either ships, or the
infrastructure that directly supplies ships with energy/fuel. For reasons of pragmatism, the criteria do not cover:● Upstream infrastructure associated with the energy used by ships in operation, for example those
associated with the production, transport of energy/fuel outside the port.
● Infrastructure associated with the construction and disposal of ships31
31 Values vary between ship types and sizes, but by way of example the embodied CO2 in a large tanker (VLCC) is approximately 90000 t. over its
life. The emissions per annum from fuel combustion are approximately 20,000-60,000t depending on how the ship is operated. Smith, T.W.P,

17

These criteria cannot be used to certify assets associated with the upstream production of fossil-basedenergy/fuel or the manufacture of ships. Other types of port infrastructure (e.g. those not directly related to thedirect supply of net-zero emissions energy/fuel to a ship), are also out of scope.
We also recognise that refrigeration gases on reefers pose a significant challenge to both our ozone layer andglobal warming, and there are opportunities for the shipping sector to reduce these impacts. However, theseassets and emissions were not included within scope of the shipping criteria because their use crosses between
different industries across the transportation and logistics sector.

4. Discussion and Eligibility Criteria for the Shipping Sector
4.1 Overarching considerations and requirements for the Shipping Sector
The requirements have been defined for both the shipping sector as a whole, and subsequently (Section 3) for
specific shipping assets. We propose to use a top-down approach because the environmental regulation for
reducing carbon emissions in shipping has been set at an aggregate level of carbon emissions and evaluation
criteria should be consistent across ship types and sizes. Table 5 describes the guiding requirements for the
shipping sector. These are divided into two areas, those associated with mitigating the GHG emissions in the
sector and those associated with ensuring the sector is resilient and adapted to foreseeable climate changes.
Table 6 provides the shipping sector Mitigation Recommendations. The guiding requirements for mitigation set
out in Table 5 ensure that overall, the sector is compatible with the level of ambition set in the Climate Bond
Standard Shipping Criteria – to keep global warming well below 2°C above pre-industrial levels, making efforts
to limit temperature increase to 1.5°C, set by the Paris Agreement. To make this transition, the shipping sector
needs to anticipate the challenges of decarbonising the shipping stock by anticipating future financial impacts ofdecisions made at the time of investment.
Table 5: Guiding requirements for the Shipping Sector
Area

Requirements

Mitigation● The asset is compatible with transition to low carbon economy and keeping global
warming well below 2°C.
● The asset is resilient to transitional risks by anticipating future financial impacts

Adaptation● The asset adapts to adverse climate impacts such as severe storms and sea level rise.
● The asset promotes resilience to climate change.

4.1.1

Adaptation and resilience requirements for the Shipping Sector

The guiding requirements for adaptation will be discussed during the TWG/IWG meetings and aligned with otherongoing work at Climate Bonds Initiative, particularly that of the Adaptation and Resilience Expert Group (AREG).
With regards to flood defence and surge barrier investments, issuers can refer to existing Water Infrastructure
criteria.
4.2 Specification and justification of mitigation requirements for the Shipping Sector
Table 6 provides recommendations for meeting the shipping sector mitigation requirements. The following
sections discuss and justify each recommendation.

Parker, S. Rehmatulla, N. On the speed of ships. www.lowcarbonshipping.co.uk, Harish, C. R., Soumya S.K. (2015) Energy Consumption andConservation in Shipbuilding. International Journal of Innovative Research and Development 4 7/26-31:

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Table 6: Guiding recommendations for criteria development
Recommendations● The shipping sector is compatible if it meets the upper bound of the IMO’s Objective 3 for GHG emissions topeak and reduce by 100% by 2050, and for emissions to continuously decline leading up to 2050. This isapproaching the ambition of the Paris Agreement (see Section 2.3).
● The global fleet’s compatibility will be assessed using the global carbon-equivalent intensity required tomeet the climate goals over a time horizon to 2050.
● Dedicated infrastructure that enables the supply of non-fossil fuel/energy to a ship, or the transfer andtransport of captured emissions from a ship are also eligible.
● An asset must operate underneath the emissions intensity threshold for its respective class and size for eachcorresponding year that the bond is outstanding.
● An asset should not cause significant harm to climate change mitigation through the activities that it
enables.
4.2.1

Sector compatibility with a <2°C level of ambition

Section 2 discussed the inconsistencies between the IMO’s second and third objectives – carbon-equivalentintensity and absolute GHG reduction targets. For the reasons stated, it is recommended that the Standard isaligned with the IMO’s absolute emissions objective – reducing GHG emissions by “at least” 50% by 2050
compared to 2008 levels. The “at least” terminology leaves open the possibility that the IMO will pursue an upperbound of emissions reductions of 100% by 2050.
The Strategy’s upper bound of 100% reduction and requirement for emissions to peak as soon as possible wastherefore identified as the sufficient level of ambition for the purposes of the Shipping Criteria and consistent
with the Standard’s ambition to comply with the Paris Agreement. In addition, as climate change is a result of
the cumulative emissions in the atmosphere, absolute emissions must peak as soon as possible and decline over
the time horizon been the peak and 2050.
4.2.2

Metrics for assessing whether mitigation requirements are met

Both absolute and intensity-level measurements of GHG emissions are useful for evaluating a sector against a
climate goal. Absolute emissions are important, as this is the total emissions figure that ultimately needs to be
reduced to mitigate climate change. However, this does not provide sufficient information for a company tounderstand the carbon (or carbon equivalent) efficiency with which it conducts its business activities, because
vessels have different production units and need to be compared on a like-for-like basis.32 For this reason, a
relative intensity-level metric is proposed and will need to be derived in such a way that it is consistent with theabsolute emissions targets.33
In shipping, carbon intensity represents the total operational emissions generated to satisfy a supply of transport
work (gCO2e/tonne-nm). The shipping sector uses multiple metrics to assess the carbon intensity of ships (seeTable 6 of Appendix 3 for an overview of the different starting points for different size and class of ships). To
provide the most accurate representation of a vessel’s climate impact, the carbon intensity of a vessel should bemeasured from its performance in real operating conditions instead of using a design specification metric (e.g.
EEDI). The EEDI is not a reliable estimate of the carbon intensity because it assumes that the ship sails at its design
speed (full speed) and is fully loaded which in practice is not common. For newbuild ships, operational data will
not be available at the time of bond issuance and therefore the carbon intensity will need to be estimated.
In IMO nomenclature, the carbon intensity is known as the Energy Efficiency Operational Index (EEOI) but theunits are gCO2/tonne-nm rather than energy units34. An alternative intensity metric is the Annual Efficiency Ratio(AER). AER is reported in unit grams of CO2 per tonne-mile (gCO2/dwt-nm35). This metric is calculated using an
32 CDP, 2018. CDP Technical Note: Measuring emissions intensity of transport movements.
33 This is also consistent with CBI’s approach to on-land freight transport criteria.
34 Tonne-nm is a measure of useful work done and is calculated as deadweight carried X distance.
35 Dwt-nm: a measure of a ship’s weight carrying capacity (not including the empty weight of the ship) x distance19

approximation of the total annual transport work performed by a ship, obtained from its distance travelled anddeadweight (in tonne units). It is recognised that AER is less accurate at estimating a vessel’s carbon intensity
than some other metrics (e.g. EEOI), which use data on the actual mass of cargo carried and the loaded miles
rather than total miles. Because there are other important emissions that contribute to climate change which
are expected to increase from LNG-powered ships which emit methane, we propose using carbon-equivalentintensity (gCO2-e/tonne-nm36) as the metric for assessment of mitigation requirements.
To choose the appropriate metric, we evaluated each metric based on the following criteria:• Enables comparison of ships with different transport work units• Can measure GHG emissions of ships in real operating conditions• Data is available at a global level for all ships• Can be aligned with IMO’s Initial Strategy absolute GHG emissions reduction objective
Table 7 shows that no single metric satisfies all of the criteria. The most useful metrics were EEOI and AER, buteach has a trade-off between theoretical accuracy of the measure and data availability. EEOI is the mosttheoretically correct measure to use because it enables the carbon intensity to be measured on an apples-toapples basis for ships with different transport work units. However, currently EEOI data is only available forvoyages into and out of the EU. This means that ships which sail on voyages between China and the US, a major
trade route, would not be captured.
Table 7. Comparison of different metrics for measuring emissions performance.
MetricEnablescomparison ofships withdifferent
operational
production units

Absolute Emissions

Can measure all
GHG emissions ofships in real
operating conditions

Data
available atglobal level
for all ships

Can be alignedwith IMO’s Initial
Strategy absolute
GHG emissions
reduction
objective✓✓✓

As-designed technicalefficiency (EEDI)✓✓

Technical efficiency ata point in time (EVDI)✓✓

Annual Efficiency
Ratio (AER)

Via proxy fortransport work✓

Energy efficiency
operational index(EEOI)✓✓✓

Via proxy for actual
carbon intensity✓

On the other hand, AER assumes that ships are 100% utilised (i.e., fully loaded on all miles travelled) which isoften not the case (e.g., ships are not loaded to 100% of their DWT and ballasts are emptied after unloading,especially in the tanker and dry bulk carrier trades). However, there will be global data coverage of AER startingin 2020 as a result of the IMO DCS regulation. AER can be used assuming 100% cargo utilization, as long as thedecarbonisation trajectory is also constructed with the same 100% cargo utilization assumption. Alternatively,
AER (and the decarbonisation trajectory) can be calculated with an assumed default value for cargo utilization(e.g. 60%). Data for each ship size/type will be available in Fourth IMO GHG Study up to 2018. The assumed
default value for cargo utilization for each ship size/type shall be revisited on a biennial basis, to shift withpotential shifts in market dynamics.

36 In the case of passenger ships (i.e., cruise and ferry), gCO2-e/GT is used. GT is the gross tonnage of the ship, a proxy for number of passengers.

20

We propose to take forwards both EEOI and AER with estimated utilization from published sources (“adjusted
AER”) metrics. If the vessel is expected to trade 100% of the time on voyages that are within the EU, the issuer
must report EEOI data. Otherwise, the issuer needs to report IMO DCS data that enable the AER calculation, or
can opt in to being measured on EEOI data, but in that event will need to enable an additional verification step(to validate the cargo mass data required for the EEOI calculation which is not covered in the IMO DCS system).
Issuers shall have the right to provide verified data on actual cargo utilization for a specific ship, in an effort toincentivize transparency as well as properly incentivize businesses that have better asset utilization.
4.2.3

VERIFICATION OF DATA FROM IMO DCS AND EU MRVThe EU MRV Regulation requires mandatory third-party verification in order to ensure the accuracy of the datasubmitted. It uses a specific verification system based on internationally agreed ISO standards and EU specificverification rules. In the IMO DCS there is no specific verification system for this data collection. Instead, flag
Administrations shall verify the data according to national rules, taking into account 30 IMO guidelines. Flag
States can outsource those tasks to “Recognised Organizations” (RO), subject to verifications and audits under
the RO Code. However, ROs do not need to be accredited by National Accreditation Bodies. Note that, in
accordance with the EU legislation, EU MS have to use only EU recognised organisations in order to comply with
their reporting obligations under IMO DCS.
In order to meet Climate Bonds Certification requirements, issuers are required to submit information
reported on an annual basis of their achieved EEOI or AER, alongside evidence that the data was also submitted
and verified for EU/IMO purposes.
4.2.4

Port infrastructure compatibility

As discussed in Section 3.2, fuel and energy (i.e., electricity) is required to reduce the carbon-equivalent intensityof the global fleet. This needs to be supported by the availability of bunker fuels and energy to power ships. For
example, infrastructure that supports the supply of hydrogen, biofuel, ammonia and renewable electricity is
considered compatible. This does not include infrastructure that is used to deliver LNG.
4.3 Criteria for assessing asset eligibility with respect to mitigation requirements
The shipping sector is amongst the sectors labelled “harder-to-abate.”37 In these sectors, the development oftechnologies required to achieve decarbonisation is in progress but are either not widely available, not used(because of market barriers and failures preventing take-up38), or still need to reach commercial viability. As ships
and port infrastructure typically have asset lives measured in decades (e.g. many ships are designed for 25-30
years of operation), the technology onboard a ship today could create a “lock-in effect” if there are no costeffective solutions to meet future targets (e.g., by investing in new technologies that convert the ship to use zerocarbon fuels or ensuring availability of fuel at ports). The following sections discuss the recommendations for
ensuring a ship can cost-effectively meet future targets.
Table 8 summarises the mitigation screening criteria. This requires that assets are designed and specified to be“best in class” today and also compatible with future regulatory and technological changes that may occur overan asset’s lifetime as the sector transitions to a low carbon sector. Ships include both newbuilds and retrofits toexisting ships.

37 [ETC, Mission Possible Report]
38 Rehmatulla, N. and Smith, T.W.P. (2015) Barriers to energy efficient and low carbon shipping. Ocean Engineering 110:102-112

21

Table 8: Criteria for establishing eligibility at the point of bond issuance
Asset Category

Criteria

Ships

Demonstrate that the expected carbon-equivalent intensity of ship is aligned with thedecarbonisation trajectory of the ship’s type/size category (“the ship’s class”) over the
lifetime of the bond. Ships must either be specified to be zero-carbon from the year thebond is issued (i.e., a zero-carbon vessel)39 or if there is insufficient market penetration (seebelow) of appropriate technology/fuel, have a managed reduction in carbon-equivalentintensity through the lifetime of the bond.
In cases where the ship is not already zero carbon emissions, the issuer is required toprovide a managed reduction plan to show that it is cost-effective to align the ship(s)expected carbon-equivalent intensity with the required intensity for its class(es) over the
lifetime of the asset(s).

Infrastructure

Demonstrate that infrastructure supports the supply of non-fossil fuel/energy in the port
(e.g. local battery storage, grid connection, fuel production technologies, fuel storage
facilities), supply of non-fossil fuel/energy from the shore to the ship (e.g. shore power
connection infrastructure, bunkering infrastructure including bunker barges) orinfrastructure to transfer and transport captured emissions from the ship for onwards
sequestration.

Programmes

programmes (e.g. retrofit technologies for an existing ship or fleet of ships or fleet/portbased initiatives such as speed management) reduce the carbon-equivalent intensity of an
existing ship or fleet of existing ships as specified at issuance. A programme enables a ship(s)to be aligned with the decarbonisation trajectory for the ship or ships’ class(es) throughout
its lifetime according to the decarbonisation trajectories of those ships’ classes. In cases
where the ship is not already zero carbon emissions, the issuer is required to provide amanaged reduction plan to show that it is cost-effective to align the ship(s) expectedcarbon-equivalent intensity with the required intensity for its class(es) over the lifetime of
the asset(s).

4.3.1

Background on how assets can ensure compatibility with sector mitigation requirements, given
current levels of availability of technologies and associated energy/fuel sources.

In many cases, the technologies and energy/fuel sources that are needed to enable operation right away at levelsof carbon-equivalent intensity that align with expected future projected levels are not widely available. Of thosethat are available, many are then not cost-effective or commercially viable. To enable progressive reduction incarbon-equivalent intensity over the lifetime of an asset, which would allow the specification to remain
continuously aligned with the requirements defined in Section 4.1, there are several options:- Ensure that the ship as specified at issuance will operate immediately with some of the lowest levelsof carbon-equivalent intensity within its current peer group.
- Fit technologies which produce GHG reductions now and will also enable GHG reductions in the future(e.g. many (but not all) energy efficiency technologies, wind assistance, solar, etc. if they are costeffective now, will likely continue to be cost-effective after a switch away from fossil fuel use).
- Expect to change the operational regime to enable alignment with future lower carbon intensities (e.g.
anticipate future reductions in speed that could be used whilst retaining competitiveness).
- Fit technologies and fuel/energy storage now which is flexible and able to be operated competitively
in the future with non-fossil fuels.
- Fit technologies and fuel/energy storage (or put aside space for energy storage) now which for a small
additional cost can be modified to be operated competitively in the future with non-fossil fuels.

39 In the case of a newbuild, the year of bond issuance may not be the same year the ship is operating. In this case, the ship must meet thealignment criteria from the first year the ship is expected to be in operation.

22

4.3.2

Criteria for establishing eligibility at the point of bond issuance

Table 8 outlines a number of proposed screening criteria and screening metrics for each of the asset categories– ships, infrastructure and equipment/technology. This criteria for ships require that the expected carbon
intensity of ships must be no greater than the decarbonisation trajectory for that ship type/size category overthe lifetime of the ship. For example, eligible ships with sufficiently low carbon intensity could be represented by
the green dots in Figure 6, it illustrates climate alignment for a set of Suezmax vessels using a hypothetical
decarbonisation trajectory for the Suezmax fleet.
Figure 6: Example of climate alignment for a set ships

Data points which lie below (above) the decarbonisation trajectory (blue curve) are aligned or misaligned withthe decarbonisation trajectory. The delta ∆! in Figure 5 represents the alignment (the distance between its actual
carbon intensity measure and the trajectory) for a vessel at a single point in time (shown here in 2019). Overtime, vessels will need to reduce their intensity to stay on or below the curve. In this example, after 2025, if nofurther action is taken, then both of the aligned vessels (green dots) will become misaligned, and will need toreduce their intensity through speed, technology retrofits and/or change in the fuel type.
Standard decarbonization trajectories have been produced by CBI for each ship type and size category. Appendix
3 describes the method used for establishing the target carbon intensity for a given ship type and size category
in a given year. This is carried out by calculating a decarbonization trajectory from 2012 out to 2050. The method
is derived from IMO Secretariat commissioned data sources, both the Third IMO GHG Study and IMO MEPC 68
Inf. 24 publication. Assumptions for formulating the trajectory are also taken from the Initial Strategy, including
the use of a 2008 baseline. The trajectories currently reflect carbon emissions. This serves as a proxy for GHG
emissions, as carbon emissions accounted for 98% of the industry’s GHG emissions but will be corrected whenthe 4th GHG Study is released. Full trajectories will also be provided in the next update to the paper.
For bonds where the proceeds will go towards financing new build ships, data will not be available to validate
whether the ship has met the criteria at the point of issuance. Carbon-equivalent intensity is a function of thetechnical efficiency (e.g. the technologies onboard a ship), operational parameters (e.g. speed, cargo-carried anddistance sailed) and the type of fuel used. Specifically, fuel consumption and type of fuel, cargo-carried and the
distance sailed to fulfil transport work when loaded needs to be estimated over the lifetime of the ship.
Operational parameters are influenced by market conditions and fluctuate year-on-year.
It was recognised that some ships which meet the Shipping Criteria during the life of the bond will exceed theemissions intensity threshold at some point during its operating life (even if this is after the bond has matured).
To reduce the risk of CBI certifying a bond where proceeds will be used to finance a ship that would at some23

point, fail to provide a significant contribution to meeting CBI’s climate ambition, all ships that are not zero
emissions must provide a Managed Reduction Plan (MRP) that states the compatibility and plans to add retrofit
technologies or a fuel switch to comply. These plans must show how the asset will achieve compliance withcarbon-equivalent intensity trajectories through future retrofit or switches in energy source, and that this can beachieved without significant additional costs (whether capital or operating costs) relative to foreseeable future
assets, such that the asset should remain competitive.
By way of example, a fossil fuelled ship built in 2025, may plan to undertake a refit after 5 years of operation atwhich additional fuel tanks (for non-fossil fuel) are installed and an engine conversion undertaken. Efforts taken
at design/build can ensure that space for the tanks and access to machinery can minimise the cost of that refit,
such that the ship can be competitive against newbuild ships entering the fleet in 2030 and operating on nonfossil fuel.
Given the potential reliance on anticipated future changes (retrofit, energy switch) beyond the period of thebond, to achieve continued compliance with the decarbonisation trajectory, we thus require that the bond issuer
present an MRP at the point of investment if the ship is not zero-carbon at the point of bond issuance. This MRP
plan can rely on future technologies/fuels that are not available today but are expected to become available andcost-effective in the future, in time for the continued compliance with the decarbonisation trajectory. The list of
candidate fuels for use in the reduction plan will be regularly reviewed, but initially includes:40- Hydrogen- Ammonia- Advanced Bioenergy41- Methanol (from bio or synthetic feedstock)- Nuclear- Wind- Electric
At present, there is no evidence that synthetic LNG or synthetic diesel will be available at sufficient volumes andso they are not eligible for use in a reduction plan. The MRP should include the following details:- The time period about which a significant fuel switch will be necessary- Any modifications required to fuel storage systems onboard (including any additional space requiredand how this modifies cargo carrying capacity)- Any modifications required to fuel handling systems (including bunkering systems)- Any modifications required to machinery- The estimated total additional cost
During the public consultation period, CBI received useful feedback from various industry stakeholders
outlining the various challenges associated with the MRP requirement outlined in these criteria.
Further guidance to support issuers with submission of MRPs:
●

●

●

●

The MRP is a novel requirement that currently does not exist in the market. The intention is toencourage issuers to think about future technology pathways and scenarios, and to help themuse our Certification tool as a means of communicating this to market.
We will not withhold Certification on the basis of quality of the MRP. While we encourage besteffort on the part of the issuer in preparing this documentation, we acknowledge that due to thelack of comparable documentation, we cannot currently reference ‘best practice’.
We will accept MRPs, provided that the documents submitted provide the details required
above and clarifies the types of fuels/energy sources that the issuer intends to transition
towards.
However, we expect that over time, the ambition and quality of these MRPs will reveal itself. We
are hopeful that the shipping industry will draw on existing documentation such as the Ship
Energy Efficiency Management Plan (SEEMP), to guide their submissions.

40 The selection of these fuels is based on research conducted by UMAS/UCL into potential future fuel-technology pathways:
41 As listed in Part A, Annex IX of the EU Renewable Energy Directive (2018/2001/EU).

24

The public consultation also brought to our attention the need for more clarity on the role of LNG. The
following points are intended to provide more background on CBI’s stance on LNG.
•

Currently, LNG is not eligible as a candidate fuel under the MRP.
o While there is some credence to the role of natural gas as a ‘transition’ fuel, it is not
however, given evidence around the extent of methane leakage and the severity ofmethane global warming potential, we do not currently view natural gas as Paris-aligned
energy type.

•

Advanced Bioenergy, such as BioLNG is eligible.
o BioLNG and other biofuels produced from feedstocks listed in Part A, Annex IX of the EU
Renewable Energy Directive (2018/2001/EU) are eligible as candidate fuels for the MRP.
o Combustion of BioLNG presents an opportunity for the shipping sector to reduce its climate
impact without making significant modifications to assets. However, we recognize that
BioLNG can be produced from primary or secondary feedstocks. The former would create
limited climate mitigation benefits due to the climate impacts of producing energy crops.
o Therefore, in order to encourage transparency, we recommend that issuers who reference
BioLNG in their MRPs provide certificates to prove the origin of the fuels.

4.3.3

Procedure for monitoring eligibility over the period of the bond

All certified bonds have to report annually to confirm that assets remain in compliance. The carbon-equivalentintensity of a ship will need to be monitored over time to ensure adherence to its projected values because it
can vary as a function of operational choices (e.g. speed and utilisation) and also fuels used. The monitoringprocess requires that the issuer of a bond reports annually on the actual in-service carbon-equivalent intensityof operations. The metric and the report should be consistent with those used to meet the Shipping Criteria.
The report must be based on data that has been verified by an independent third party. It is proposed that thedata used to generate the report should be either those values reported by the asset owner (in this case theship), to report to the IMO’s Data Collection System, or the EU’s MRV system, for which minimum verification
standards have already been defined. The use of such pre-existing systems also ensures that no additional datacollection burden should be required.

5. Adaptation & Resilience Principles
CBI’s Climate Adaptation & Resilience Principles are designed to provide a framework for Climate Resilience
Criteria requiring Certified Climate Bond issuers to go beyond just assessing climate risks. Specifically, issuersmust demonstrate that for the assets and activities (re)financed via the bond they:●●●●

Understand the climate risks faced by the asset, activity or system in question;
Have addressed those risks by undertaking risk-reduction measures and adopting flexible
management plans that take account of inherent uncertainties around climate change, ensuring thatthe asset, activity or system is robust, flexible and fit-for-purpose in the face of that uncertainty;
Can deliver resilience benefits over and above addressing identified risks (for system-focusedinvestments); andAre undertaking regular (re)evaluation of the asset and/or system’s climate resilience performance,adjusting to risk reduction measures over time as needed.

Despite our best efforts to develop criteria on adaptation and resilience for the shipping sector, there are
currently no additional mandatory requirements for issuers to meet CBI’s Climate Resilience Principles.
This is because vessels are implicitly fit for purpose in changing climates as existing standards and classificationsociety requirements are already capable of ensuring that vessels are able resilient to extreme weather events.
25

Further-more, it was determined that existing shipping sector regulations, in particular The International
Convention for the Prevention of Pollution from Ships (MARPOL) and The International Convention for the Safetyof Life at Sea (SOLAS) were found to provide an adequate basis for protecting the marine environment as well as
human lives at sea. As such, the shipping sector is currently derogated from the requirements of CBI’s Climate
Resilience Principles. This will be subject to periodic review.
The resilience of infrastructure that is dedicated to recharging or refuelling zero-emissions ships was found to beoutside the specialisation of the Shipping Criteria TWG. Moreover, the Climate Resilience Principles that would
be developed for infrastructure on ports would be better developed as separate criteria. As such, assets that arededicated to recharging or refuelling infrastructure for zero-emissions ships are currently derogated from therequirements of CBI’s Climate Resilience Principles. This will be subject to periodic review. Further information
about our rationale and the outcomes of the discussions can be found in Appendix 4.

26

6. Summary of Criteria
Criteria:● Ships must not be dedicated to transporting fossil fuels (Crude Oil or LNG Carriers)42 and:● Ships must either be specified to be zero-carbon from the year the bond is issued or,● Ships must demonstrate that the expected carbon-equivalent intensity of the ship is aligned with thedecarbonisation trajectory (emissions intensity threshold) for that ship’s type/size category (“theship’s class”) over the lifetime of the bond.43, 44,o Ships that are not net-zero must provide a managed plan that shows how the ship can remain
under the emissions intensity threshold during the operational life of the ship.
Metric:Annual Efficiency Ratio (AER): The ratio of a ship's carbon emissions per actual capacity-distance (e.g., gCo2e/tnm). The IMO’s Data Collection System (DCS) enables AER to be calculated for all ships 5,000 GT and above
trading on international voyages. Data will not be made publicly available, but available on the consent of the
shipowner. Estimated data can be used but has lower accuracy.
Energy Efficiency Operational Index (EEOI): The total operational emissions to satisfy transport work demanded,this is usually quantified over a period of time which encompasses multiple voyages (e.g. a year). It measures theratio of a ship's carbon emissions per unit of transport work (e.g., cargo x nm sailed). The EU MRV has made EEOI
publicly available for voyages into and out of the EU.
Managed Reduction Plans:
In the case where the underlying asset is not already zero emissions, the bond issuer is required to provide amanaged reduction plan that states the compatibility and plans to add retrofit technologies or a fuel switch thatwould enable the asset to comply and also explain how these plans are cost-effective.45 This reduction plan canrely on future technologies/fuels that are not available today but are expected to become available and costeffective in the future, in time for the continued compliance with the decarbonisation trajectory. The list of
candidate fuels for use in the managed reduction plan will be regularly reviewed, but initially includes:46● Hydrogen● Ammonia● Advanced Bioenergy● Methanol (from bio or synthetic feedstock)● Wind● Electric
The managed plan should include the following details:● The time period within which a significant fuel switch will be necessary● Any modifications required to fuel storage systems onboard (including any additional space requiredand how this modifies cargo carrying capacity)● Any modifications required to fuel handling systems (including bunkering systems)● Any modifications required to machinery● The estimated total additional cost

42 For bonds where proceeds will be used for dry bulk carriers, issuers must show that (a) coal did not constitute more than 25% of dry bulk by tons
carried by the firm over the previous 3 years, based on the bills of lading, and (b) coal does not constitute more than 25% of dry bulk carried by theasset and the firm during the lifetime of the bond, reported annually and based on the bills lading.
43 In the case of a newbuild, the year of bond issuance may not be the same year the ship is operating. In this case, the ship must meet thealignment criteria from the first year the ship is expected to be in operation.
44 Refer to Annex 1. to identify the respective, initial emissions intensity for a certain size and class of ship. The threshold declines to zero by 2050.
45 Cost-effective, in this case, means that if the planned means to achieve compliance with carbon-equivalent intensity trajectories include somefuture retrofit or switch in energy source, this can be achieved without significant additional costs (whether capital or operating costs) relative toforeseeable future assets, such that the asset should remain competitive. For example, a fossil fuelled ship built in 2025 may plan to undertake arefit after 5 years of operation at which additional fuel tanks (for non-fossil fuel) are installed and an engine conversion undertaken. Efforts taken atdesign/build can ensure that space for the tanks and access to machinery can minimise the cost of that refit, such that the ship can be competitive
against newbuild ships entering the fleet in 2030 and operating on non-fossil fuel.
46 At present, there is no evidence that synthetic or bio LNG or synthetic or bio diesel will be available at sufficient volumes and so they are noteligible for use in a reduction plan.

27

In essence, issuers must demonstrate that the expected carbon-equivalent intensity of the ship is aligned withthe decarbonisation trajectory (emissions intensity threshold) of the ship’s type/size category (“the ship’sclass”) over the lifetime of the bond, reaching zero emissions by 2050.47,48 Issuers are required to show thateach asset targeted for the Use of Proceeds from a Certified bond, is operating below the emissions intensity
threshold in each respective year that the bond is outstanding. Ships that are not zero-emissions must provide
a managed reduction plan (MRP) that shows how the ship can remain under the emissions intensity threshold
during the operational life of the ship. Figure 7 below provides an overview of the eligibility criteria for
certifying a vessel under the Climate Bonds Standard and Certification scheme.
Figure 7. below provides an overview of the eligibility criteria for certifying a vessel under the Climate Bonds
Standard and Certification scheme.

47* For bonds where proceeds will be used for dry bulk carriers, issuers must show that (a) coal did not constitute more than 25% of
dry bulk by tons carried by the firm over the previous 3 years, based on the bills of lading, and (b) coal does not constitute more than
25% of dry bulk carried by the asset and the firm during the lifetime of the bond, reported annually and based on the bills lading.
In the case of a newbuild, the year of bond issuance may not be the same year the ship is operating. In this case, the ship must meet
the alignment criteria from the first year the ship is expected to be in operation.
48 Refer to Annex 1. to identify the respective, initial emissions intensity for a certain size and class of ship. The threshold declines tozero by 2050.

28

Appendix 1: TWG and IWG members
Lead Consultant:
Tristan Smith, University College London
Sophie Parker, University College London
Adaptation & Resilience Experts:
Adolf Ng, University of Manitoba
Mawuli Afenyo, University of Manitoba
Roozbeh Panhi, University of Manitoba
Technical Working Group Members:
Aoife O’Leary, Environmental Defense Fund
Andrew Gazal, ESG TechPeter Chant, Fremco
Alison Morris, Fremco
Johannah Christensen, Global Maritime Forum
Katharine Palmer, Lloyd’s Register
Michael Adams, Ocean Assets InstituteJames Mitchell, Rocky Mountain Institute
Diane Gilpin, Smart Green Shipping AllianceDavid Connolly, Southampton University
Bruce Anderson, Starcrest Consulting
Nicole Rencoret, Sustainable Shipping Initiative
Andrew Stephens, Sustainable Shipping Initiative
John Broderick

Industry Working Group Members:
Joop Hessels, ABN Amro
Katherine House, Affirimative IM
Michael Parker, Citi
Lars Mac Kay, Danske Bank
Knut Elvind Haaland, DNB
Lars Kalbakken, DNB
Nina Ahlstrand, DNB
Gust Biesbroeck
Kristoffer Olsen, ITM PowerTed Shergalis, Magnuss
Astrid Molstad, Molnex
Jacob Michaelsen, Nordea
Margrete Ellertsen, Nordea
Yoshiaki Hamano, NYK
Yusuke Matsui, NYK
Christopher Rex, Skibskredit
Sara Møller Jensen, Skibskredit
Nikos Petrakakos, Seabury Capital
Henrik Piper, Silverstream Tech
Jens Peter Neergard, Silverstream TechPaul Stuart-Smith, Zero Carbon FinanceWith thanks to:
Georgios Plevrakis, American Bureau of Shipping
Stephen Cadden, Sea LNG
Steve Esau, Sea LNG
Samuel Kenny, Transport & Environment
Faig Abbasov, Transport & Environment
Dominik Englert, World Bank
Andrew Losos, World BankMark Lutes, World Wide Fund for Nature

29

Appendix 2: Carbon Intensity Metrics
Although technically carbon intensity and energy efficiency have different meanings, they are synonymous in the
IMO’s nomenclature. Table 10 provides descriptions of various efficiency related terms. As shown in Table 10
below, no single definition provides all the information that might be wanted to understand energy efficiency or
carbon intensity. Definitions that might be useful for some stakeholders can obscure information that might beuseful to others. For example, shipowners and charterers might be most interested in understanding theperformance of a ship in a reference condition and therefore may find the different types of ‘technical efficiency’
most useful, whereas a regulator or a shipper who wants to understand the carbon intensity of shipping as amode of transport might be more interested in ‘total efficiency’.
MetricDescription

Pros/Cons

Data/practical considerations

Absolute
emissions

The emissions generated to
produce transportation service.
Specified as tank-to-wheel (theoperations of ship) or well-totank, from the well where fuelwas produced to wheel.

Total emissions are important at
sectoral level as it provides abaseline for mitigation required by
sector. However, it does notmeasure the CO2 efficiency withwhich a company/ship conducts its
business activities.

Asdesigned
technical
efficiency(e.g., EEDI)The efficiency of a ship in its asdesigned condition (straightfrom the yard) in ideal
conditions.

Technical
efficiency
at a point intime (e.g.,
EVDI)

The efficiency of a ship of acertain age, following wear,
deterioration and fouling,
benchmarked to ideal
conditions.

AnnualEfficiency
Ratio (AER)

The ratio of a ship's carbon
emissions per actual capacitydistance (e.g., dwt x nm sailed).

Not a reliable for estimating
carbon intensity as assumes ship
sails at design (full) speed, fully
loaded and operates in calm sea
conditions, all of which are
unrealistic assumptions.
Although metric takes into accountthe age, wear and tear as ships
deteriorate through life, which all
reduce efficiency (controlling fordesign speed and load), the metricdoes not represent the real-world
operational conditions of the ship.
Assumes ships are fully loaded on
all miles travelled during the year.
In practice, ships are not always
fully loaded and many ships (e.g.,tankers and bulkers) operate withballast voyages where for several
voyages a year they have no cargo.

Data is available from the 3rd
GHG Study for total shipping
emissions and ship type/size.
For individual ships, data fromIMO DCS can be used but not
publicly available (on consent
of shipowner only), althoughestimated data could be used,
but has lower accuracy.
Can be measured fromtechnical fleet database.

Energyefficiency
operational
Index(EEOI)The total operational emissions
to satisfy transport work
demanded, this is usuallyquantified over a period of time
which encompasses multiple
voyages (e.g. a year). The ratio ofa ship's carbon emissions perunit of transport work (e.g.,cargo x nm sailed).

Considered the ultimate
measurement of a ship‘s estimatedreal world efficiency in that it
incorporates all of the components
listed above, emissions when theship is in port/anchor etc. This iswhat the EEOI metric is attempting
to measure.

Data is available from technicalfleet database, using
assumptions on wear,
deterioration and fouling.

The IMO’s Data Collection
System (DCS) enables AER to
be calculated for all ships 5000
GT and above trading on
international voyages. Data will
not be made publicly available,
but available on the consent of
the shipowner. Estimated data
can be used but has lower
accuracy.
The EU MRV has made EEOI
publicly available for voyages
into and out of the EU.
Estimated data could be used
but has lower accuracy.

30

Table 10. Definitions of carbon intensity in Shipping
Efficiency metrics (gCO2/tonne-nm) allow for an apple-to-apple comparison between two vessels whose cargo
movements produce different levels of transport work. They also enable the tracking of progress over time andcomparison across different shipping fleets, companies, and different modes of transport.
The carbon intensity of a ship in real operating conditions is known as the Energy Efficiency Operational Index(EEOI). It is the metric adopted by the IMO and represents the CO2 emitted per tonne nautical mile for a voyageor specific time period. It can either be calculated from fuel consumption measurements and information on
cargo carried and distance travelled or estimated using satellite tracking data and fleet technical specifications.
EEOI therefore accounts for the real operating conditions of the vessel and their impact on fuel consumption(e.g., speed, weather, draught). and is therefore a more accurate representation of the CO2 efficiency than if theefficiency were estimated in the vessel’s designed (or optimal operating) condition as is done by the Energy
Efficiency Design Indicator (EEDI) or EVDI. The as-designed efficiency assumes that a ship operates in its designed
speed (often above the actual ship speed) in ideal weather conditions and is fully loaded.
The EEOI is influenced by speed, utilisation and a ship’s technical efficiency. Increasing the energy efficiency of aship lowers the EEOI, controlling for all other factors. In practice however, there could be rebound effects as aresult of the lower marginal operating cost from the technical efficiency improvement. If the ship is operating on
zero emissions fuels, this rebound effect is no longer an issue.
The Annual Efficiency Ratio (AER) measures carbon emissions associated with transport work, but it uses a ship’s
size (deadweight) as a proxy for cargo carried. This doesn’t provide an apples-to-apples comparison between
two ships which carry different cargo amounts. Cargo influences the numerator (carbon emissions) because aship which carries a larger cargo requires more energy for propulsion and the denominator (transport work is afunction of cargo carried and distance). Because ships are not typically fully utilised, the AER would overestimate
the efficiency of the ship. The IMO’s Data Collection System, will require data to be collected (e.g., fuelconsumption, distance sailed and DWT) for all ships 5000 DWT and will enable the calculation of AER.
The Clean Cargo Working Group, a global carrier-shipper initiative dedicated to environmental performance
improvement in marine container transport through measurement, evaluation, and reporting, uses a modified
version of the Annual Efficiency Ratio for carbon intensity reporting. It applies a utilisation factor of 70% toestimate EEOI.
The CDP 2018 transport services climate change questionnaire request companies to report primary intensity
metrics. These metrics measure the efficiency of transportation based on the actual work being done. The work
done is expressed as a common unit in tons of CO2e per unit of goods/passengers, per unit of distance. The
framework presents a harmonized approach to calculating both absolute emissions and emission intensity acrossall transport modes in the 2018 CDP questionnaire. Wherever possible, the GLEC framework has aligned its
approach to existing sector methodologies that have already been developed and are widely used within thelogistics sector.49 In shipping, GLEC has adopted two leading standards as base methodologies: the International
Maritime Organization’s (IMO) Ship Energy Efficiency Operational Indicator (EEOI) and Clean Cargo Working
Group (CCWG) CO2 Methodology (IMO, 2009; CCWG, 2014). The Framework recommends upscaling emissions
to include upstream emissions (well-to-wheel accounting) and upscaling CO2 emissions to CO2-equivalentemissions.

49 [Placeholder for GLEC Framework ref]31

Appendix 3: Decarbonisation Trajectories
Calculation of decarbonization trajectories per ship type and size category:
The following describes the method applied for establishing the target carbon intensity for a given ship type andsize category in a given year. This is carried out by calculating a decarbonization-consistent carbon intensity
trajectory from 2012 out to 2050. The method is derived from IMO Secretariat-commissioned data sources, boththe Third IMO GHG Study and publication IMO MEPC 68 Inf. 24. Assumptions for formulating the trajectory arealso taken from the Initial IMO GHG Strategy, including the use of a 2008 baseline.
Ship type and size definitions:
Carbon intensities vary as a function of ship type and size, as well as a ship’s technical and operational
specification. To enable the carbon intensity of ships to be compared to a peer group of ships of a similar typeand size, a classification system is applied. The classification system is taken from the Third IMO GHG Study,50 toenable consistency with the IMO’s process. Full details of the definitions can be found in that document. In theevent that the IMO updates the classification system used in future work, a decision on whether to update theclassification system used in the Poseidon Principles will be taken.
Estimating the ship type and size-specific carbon intensity:
Publication IMO MEPC 68 INF. 24, commissioned by the IMO Secretariat, is an addendum to the Third IMO GHG
Study and contains a dataset estimating the carbon intensities of individual ship types and sizes between 2010
and 2012. The dataset currently provides the most up-to-date source of IMO-recognized information for the
calculation of decarbonization trajectories, but as more recent data becomes available (for example in the Fourth
IMO GHG Study), the trajectories can be updated.
The most recent and the most accurate data in the publication is for the year 2012, and therefore this is used as
the historical data edge for subsequent steps of the method.
Estimating the carbon intensity improvement required across all ship types:
The overall (all ship type and size categories included as international shipping) improvement required in carbon
intensity is calculated from:
1. A projection of the foreseeable growth in tnm across all ship types between baseline (2012) and thetarget year (2050).
2. The target CO2 emissions in 2050
The projection of foreseeable growth is taken from the Third IMO GHG Study scenario RCP 2.6 SSP2. This scenario
is selected because it is most aligned with decarbonization in the wider economy, and most closely represents
the rate of GDP and trade growth that has been observed in recent years (between 2012 and 2018).
The estimate of the target CO2 emissions in 2050 is taken by applying the IMO’s Initial Strategy Objective 3
maximum target (100% reduction), to the IMO Initial Strategy’s baseline year (2008) total CO2 emissions (921Mt),
taken from the Third IMO GHG Study. The estimate of 2012 emissions is taken from the Third IMO GHG Study.
Values for the total transport demand, total CO2 emissions, and aggregate carbon intensity in 2008, 2012, and2050 are given in Table 15 below.

50 Smith, TWP, Jalkanen, JP, Anderson, BA, Corbett, JJ, Faber, J, Hanayama, S, O’Keeffe, E, Parker, S, Johansson, L, Aldous, L, Raucci, C, Traut, M,
Ettinger, S, Nelissen, D, Lee, DS, Ng, S, Agrawal, A, Winebrake, JJ, Hoen, M, Chesworth, S & Pandey, A. 2015, Third IMO Greenhouse Gas Study 2014.
International Maritime Organization, London, UK.

32

Table 15: Transport demand, emissions, and carbon Intensity for international shipping
2018
2012

2050

Total transport demand (million tonnes)

42,00049,000169,000

Total CO2 emissions (million tonnes)

921

796

0

Estimated aggregate carbon intensity (gCO2/tnm)

22.0

16.0

0

Figure 16 plots the intensity values in Table 5 and a linear trend line connecting them. There are many different
assumptions that could be applied to specify the shape of the curve that defines the rate of carbon intensity
reduction between 2012 and 2050. However, there is no strong justification for one or another. The chosen
trajectory represents a gradual and consistent rate of improvement on average across the fleet; the assumption
applied here is for a constant improvement year-on-year, which is described by a straight line between 2012 and2050.
Figure 16. Global carbon intensity trajectory
25.00

Global CO2 Intensity

carbon intensity

20.00
15.00
10.00
5.00
0.00
2008

y = -0.4287x + 878.81
2013

2018

2023

2028

2033

2038

2043

2048

2053

Year
The trajectory exceeds the IMO Initial Strategy Objective 2 intensity reduction values of 40% (2030) and 70%(2050), because it is derived to ensure achieving the IMO Initial Strategy Objective 3 (the absolute emissions
objective). Meeting Objective 3 ensures that all IMO Initial Strategy Objectives are achieved.

33

Calculating the target carbon intensity, corrected to AER, in a given year as a function of the ship type and size
The rate of reduction required per year is relative to the last historical data point (2012). The trajectory is shown
relative to 2012 carbon intensity (indexed to 2012 carbon intensity) in Figure 17. While the trajectory is presented
for the time period 2012 to 2050, it is consistent with the 2008 baseline year as specified in the IMO Initial Strategy
Objectives as the end point is determined by applying a 100% reduction relative to the baseline. The formula for the
trajectory is given in Figure 17, and allows the index value to be calculated for a given year. The index value
represents the required carbon intensity value relative to the carbon intensity in 2012.

Relative Global CO2 Intensity
carbon intensity indexed 1=2012

1.2
1
0.8
0.6
0.4
0.2
0
2010

y = -0.0263x + 53.947
2015

2020

2025

2030

2035

2040

2045

2050

2055

Year
Figure 17. Indexed decarbonization trajectory, from 2012 to 2050
The index currently chosen for CBI is AER (the same metric used for the Poseidon Principles). This index is not
explicitly calculated in the study presented in IMO MEPC 68 inf. 24, which is focused on the indicator EEOI. However,the study contains data on both the EEOI and the average utilization (both mass of cargo as a share of dwt andnumber of load voyages relative to overall voyages), broken down by ship type and size. The utilization data istherefore used to calculate AER from the median EEOI.
The AER trajectory value for a given year is calculated in the following manner:
1. Calculate carbon intensity index for the given year
2. Multiply the carbon intensity index by the adjusted median 2012 AER value
The fleet type and size category median values in 2012 are included in Table 6. The AER median values will be
adjusted using the average utilisation for each ship type and size. Values for 2019 onwards will be provided in thenext update.

34

Type

Size (GT)

Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Chemical tanker
Chemical tanker
Chemical tanker
Chemical tanker
Container
Container
Container
Container
Container
Container
Container
Container
General cargo
General cargo
General cargo
Other liquid tanker
Ferry-pax only*
Ferry-pax only*
Cruise*Cruise*Cruise*Cruise*Cruise*Ferry-RoPax*
Ferry-RoPax*
Refrigerated bulk
Ro-Ro
Ro-Ro
VehicleVehicle0-999910000-34999
35000-59999
60000-99999
100000-199999
200000-+0-49995000-9999
10000-19999
20000-+
0-999
1000-1999
2000-2999
3000-4999
5000-7999
8000-11999
12000-14500
14500-+
0-49995000-9999
10000-+
0-+0-19992000-+
0-19992000-9999
10000-59999
60000-99999
100000-+0-19992000-+
0-19990-49995000-+
0-39994000-+

2012 Median
EEOI
44.5
15.4
11.7
10.7
5.83
5.13
51
33.7
23.7
15.6
34.6
31.6
24.70
21.30
20.50
17.90
13.20
13.20
38.20
34.50
30.70
135.001611372.0
2204768.4
2589577.6
1629745.6
1893748.6
2202243.9
1693881.6
1041356.9
1440204.8
92.20
327.0080.90
158.0073.60

2012 Median
AER
31.1
8.3
5.8
4.6
3.0
2.9
44.9
24.1
15.1
8.2
21.4
18.8
12.65
10.52
9.94
8.47
5.87
5.87
30.65
21.15
16.65
123.661611372.0
2204768.4
2589577.6
1629745.6
1893748.6
2202243.9
1693881.6
1041356.9
1440204.8
61.68
268.98
58.10
58.26
17.42

2019 EEOI

2019 AER

36.3
12.6
9.5
8.7
4.8
4.2
41.6
27.5
19.3
12.7
28.2
25.8
20.2
17.4
16.7
14.6
10.8
10.8
31.2
28.1
25.0
110.1
1314540.3
1798626.9
2112550.2
1329529.3
1544900.2
1796567.4
1381850.8
849528.0
1174903.9
75.2
266.8
66.0
128.9
60.0

25.4
6.8
4.8
3.7
2.4
2.3
36.6
19.7
12.3
6.7
17.5
15.3
10.3
8.6
8.1
6.9
4.8
4.8
25.0
17.3
13.6
100.9
1314540.3
1798626.9
2112550.2
1329529.3
1544900.2
1796567.4
1381850.8
849528.0
1174903.9
50.3
219.4
47.4
47.5
14.2

Table 6. Fleet type and size specific AER in 2012 and trajectory values for 2019.
*For Ferry-pax only, Cruise, and Ferry RoPax, the denominator is GT*nm instead of tnm.

35

Table 7. Fleet type and size specific AER and EEOI values for each decade starting from 2020 to 2050. For Ferry-pax
only, Cruise, and Ferry RoPax, the denominator is GT*nm instead of tnm.
Type

Size (GT)2020 EEOI/AER

2030 EEOI/AER

2040 EEOI/AER

2050

Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Bulk carrier
Chemical tanker
Chemical tanker
Chemical tanker
Chemical tanker
Container
Container
Container
Container
Container
Container
Container
Container
General cargo
General cargo
General cargo
Other liquid tanker
Ferry-pax only*
Ferry-pax only*
Cruise*Cruise*Cruise*Cruise*Cruise*Ferry-RoPax*
Ferry-RoPax*
Refrigerated bulk
Ro-Ro
Ro-Ro
VehicleVehicle0-999910000-34999
35000-59999
60000-99999
100000-199999
200000-+0-49995000-9999
10000-19999
20000-+
0-999
1000-1999
2000-2999
3000-4999
5000-7999
8000-11999
12000-14500
14500-+
0-49995000-9999
10000-+
0-+0-19992000-+
0-19992000-9999
10000-59999
60000-99999
100000-+0-19992000-+
0-19990-49995000-+
0-39994000-+

35.1 / 24.6
12.2 / 6.6
9.2 / 4.6
8.4 / 3.6
4.6 / 2.4
4.1 / 2.3
40.3 / 35.4
26.6 / 19
18.7 / 11.9
12.3 / 6.5
27.3 / 16.9
24.9 / 14.8
19.5 / 10
16.8 / 8.3
16.2 / 7.8
14.1 / 6.7
10.4 / 4.6
10.4 / 4.6
30.2 / 24.2
27.2 / 16.7
24.2 / 13.1
106.6/ 97.6
1272135.8
1740606.6
2044403.4
1286641.3
1495064.7
1738613.6
1337274.9
822123.91137003.8
72.8 / 48.7
258.2 / 212.4
63.9 / 45.9
124.7 / 46
58.1 / 13.8

23.4 / 16.4
8.1 / 4.4
6.2 / 3.1
5.6 / 2.4
3.1 / 1.6
2.7 / 1.5
26.8 / 23.6
17.7 / 12.7
12.5 / 7.9
8.2 / 4.3
18.2 / 11.3
16.6 / 9.9
13 / 6.7
11.2 / 5.5
10.8 / 5.2
9.4 / 4.5
6.9 / 3.1
6.9 / 3.1
20.1 / 16.1
18.2 / 11.1
16.2 / 8.8
71.1 / 65.1
848090.51160404.4
1362935.6
857760.8996709.81159075.7
891516.6
548082.6758002.5
48.5 / 32.5
172.1 / 141.6
42.6 / 30.6
83.2 / 30.7
38.7 / 9.2

11.7 / 8.2
4.1 / 2.2
3.1 / 1.5
2.8 / 1.2
1.5 / 0.8
1.4 / 0.8
13.4 / 11.8
8.9 / 6.3
6.2 / 44.1 / 2.2
9.1 / 5.6
8.3 / 4.9
6.5 / 3.3
5.6 / 2.8
5.4 / 2.6
4.7 / 2.2
3.5 / 1.5
3.5 / 1.5
10.1 / 8.1
9.1 / 5.6
8.1 / 4.4
35.5 / 32.5
424045.3
580202.2
681467.8428880.4498354.9579537.9445758.3
274041.3
379001.3
24.3 / 16.2
86.1 / 70.8
21.3 / 15.3
41.6 / 15.3
19.4 / 4.6

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

*For Ferry-pax only, Cruise, and Ferry RoPax, the denominator is GT*nm instead of tnm.

36

Continuously updating the trajectories as further data becomes available
Over the timescale that the decarbonization trajectories are estimated, a number of the parameters that are used intheir calculation may change. These include:• The IMO may modify the Objectives, including when the Revised Strategies are adopted, expected 2023 (e.g., if
the Objectives increase in ambition, the carbon intensity trajectory will steepen).

• The Fourth IMO GHG Study (expected 2020/2021) and subsequent studies may update or modify the estimatesof the historical carbon intensity and carbon intensity trends (e.g., if historical estimates are revised upwards, thecarbon intensity objective will steepen).

• Transport demand growth may develop differently to the estimate used here to calculate the carbon intensity
trend consistent with a 2050 absolute GHG objective (e.g., if demand growth exceeds the trend used in thesecalculations, the carbon intensity objective will steepen).

• Demand growth may develop differentially between ship types and increase the demand for ships with different
carbon intensity than the 2012 fleet (e.g., if demand modifies the fleet composition to increase the share of emissions
by ships which have higher carbon intensity, the carbon intensity objective will steepen).

• Utilization may differ from the values estimated for 2012, which will modify the relationship between AER and
EEOI and mean that the climate alignment trajectory set using AER will need to be modified (e.g., if utilization reduces
relative to 2012, the carbon intensity objective will steepen).

While the decarbonization trajectory and the ship type and size-specific trajectory values have been calculated using
the best available data, there are a number of foreseeable reasons why these values may need to change in the
future. For this reason, it is proposed that decarbonization trajectories are reviewed every five years, approximately
consistent with the periodic release of new analysis (the IMO GHG Studies). Any update to the decarbonization
trajectories should be applied for future climate alignment, not reanalysis of historical climate alignment.

37

Appendix 4: CBI Climate Resilience Principles
The Climate Resilience Principles provide the framework for sector-specific resilience criteria. Despite our best
efforts, the Principles were found to be inapplicable to the shipping sector. The following section summarises the
key concepts and questions that arose when applying the Climate Resilience Principles to these Shipping Criteria.
The derogation of the Shipping Sector from the Climate Resilience Principles will be reviewed biennially.
The CBI AREG Principle 1 requires issuers to demonstrate that the defined systems, boundaries and criticalinterdependencies that a ship operates in are understood and clearly articulated in accordance with Principle 1. The
class and size of the ships within scope of these Shipping Criteria include those which can sail globally. It wastherefore deemed untenable to require issuers to define the operating boundaries of ships as these are expected tochange drastically throughout the ship’s operating life.
CBI AREG Principle 2 requires that an assessment of the physical climate hazards to which the ship will be exposedand vulnerable over its operating life is taken. Because ships can travel globally, their primary risks are extreme
weather events. Unlike ports, ships are naturally capable of withstanding sea level rise, extreme weather events(due to storm monitoring and weather routing systems) and are not vulnerabilities to landside risks.
CBI AREG Principle 3 requires that ships must be ‘fit for purpose’ and resilient to the risks identified in Principle 2.
The shipping sector is supported by a classification society that uses standards that reflect an operating
environmental envelope, because ships are used for global deployment, they take into account the most extreme
conditions. Assumptions on the environmental events are written into these standards and rules and derived fromdata sources taking into account meteorological and oceanographic data. This includes factors such as strength,loading conditions, and fatigue design. As such, these criteria do not require that issuers prove that a ship is ‘fit for
purpose’.
CBI AREG Principle 4 requires that an assessment of a ship’s impact on system resilience is conducted, to determine
whether a ship presents a risk to system resilience or provides a benefit to system resilience.
CBI AREG Principle 5 questions whether, in a case where ships are providing a substantial contribution to adaptation
and resilience, the ship can be derogated from fulfilling the mitigation criteria. This implies that certification isawarded based on the adaptation/resilience benefit of the ship, and that the vessel meets a minimum mitigationthreshold. Considering the limitations in pursuing CBI AREG Principle 4, it was deemed impractical at this stage toinstigate such an option. Furthermore, we could not identify a reason that a vessel should be derogated from thisrequirement. Similarly, CBI AREG Principle 6, which requires ongoing monitoring and evaluation of the relevant risks
and resilience measures and related project adjustments when needed, is not required in the Shipping Criteria at
this stage.
Recommendations for future adaptation and resilience criteria development
This section serves as a record of the discussions that were had as we attempted to apply the CRPs to the CBI Shipping
Criteria. It is hoped that they can be used as guidance to support future development of the CRP to these criteria.
Issuers are not required to provide this information CBI Certification.
CBI AREG Principle 1: Defining the boundaries and critical interdependencies
Clear boundaries and critical interdependencies between the ship and the systems they operate within are
identified. Bonds will typically be used to finance international shipping vessels that are global in scope and reach,however, it is expected that there may be some issuers seeking to use proceeds for short-haul ferries on dedicatedroutes or within a specific region. Issuers are welcome to explain the ecological and economic system within whicha ship will operate, this can include a description of the geographical region of the ship’s expected use, and if
applicable, the specific conditions of that region.
CBI AREG Principle 2: Understanding the climate risks to the asset
Issuers are welcome to provide an assessment of the key physical climate hazards which the vessel will be exposed
to over its operating life if deemed relevant. Key physical climate risks and indicators of these risks can include:
38

1.
2.

Rising temperatures leading to Melting Ice, Large Variations (Spatial and temporal), Frequent freeze andthaw cycles, may damage infrastructure, equipment or cargo.
Extreme Weather Conditions such as Hurricanes, Storms, Floods, Increased precipitation and Wind, may
damage infrastructure, equipment or cargo, and lead to reduced safety and sailing conditions which
compromise service reliability.

As this information is Optional guidance for forecasting climate related risk, Issuers can use a broad range of models
to generate climate scenarios, that may be based on Representative Concentration Pathways (RCP), or a worst-casescenario basis. Risks can be characterized by the associated annual probability of failure or annual costs of loss ordamage. The following linguistic guidance can be used to help issuers characterise the consequences that may fallupon the operations of a certified asset as a result of climate risk:
Consequence of risk factor
1 Time delay/Disruption The severity of time delays varies significantly, depending on the types of cargo beingtransported. For example, a shipping delay of time- and temperature-sensitive products will
have more severe consequences than that of normal goods. Here, disruption might beidentified as a breakdown in a maritime supply chain, where the minimum requirements
cannot be achieved.
Damagetoquality
Damage to any component within a maritime supply chain, including transported goods,
2
port infrastructure, crew, and vessels.
Additionalrunning
Additional costs include costs associated with additional operations and management (such3cost/ Financial Loss
as additional inventory costs and production costs), and fees attributable to risk drivers.
The following linguistic guidance can be used to help issuers explain the severity of the disruption/effect of the risk
factor:Severity of effect
Delay/Disruption

Low
MediumHigh

A delay of fewer than 24 hrs in total.
A delay but no more than 20% of the original schedule.
A delay of more than 20% of the original schedule.

Damage to quality

Low

Near miss or slight crew, cargo, equipment, or system damage but
fully functional and serviceable.
Minor incapability of crew, systems or equipment and a small
portion of goods may be damaged.
Damage/loss of major crew, systems or equipment, and serious
damage to the transported goods.

MediumHigh
Additional runningcost/Financial Loss

Low
MediumHigh

An additional cost no more than 10% of the total cost.
An additional cost between 10% and 50% of the total cost.
An additional cost of more than 50% of the total cost.

The following linguistic guidance could by issuers to explain the likelihood of the disruption/effect of the risk factor
occurring and/or the likelihood that the risk factor will be detected.
Linguistic grades for likelihood
Likelihood of risk factor Low (Unlikely)
occurrence
Medium (Occasional)

Likelihood of risk factor
detection

High (Frequent)Occurs less than one per year.
Occurs more than once, but fewer than 10 times in a
decade.
Occurs annually.

Low (Unlikely)
Medium (Occasional)
High (Frequent)Not possible to receive an accurate forecast.
Possible to receive an accurate forecast 6 hrs in advance.
Possible to receive an accurate forecast 24 hrs in advance.
39

CBI AREG Principle 3: Identifying the adaptation measures for different climate risks
Having identified what the potential climate risks will be for the vessel over its operating life, issuers must thenoutline the measures that have been or will be adopted to manage these risks. The measures that have or will betaken to address those risks mitigate them to a level so that the ship(s) are ‘fit for purpose’ in the face of coming
climate change over its operational life and do no harm to the resilience of the defined system they operate within,
as indicated by the boundaries of and critical interdependencies with that system as identified in Criteria 1.
A ‘fit-for-purpose’ ship (from the climate-resilience perspective), might be considered one that operates without
additional ‘downtime’ as a direct effect of climate events (extreme weather). This might be interpreted to imply thatships’ maintenance schedules are not extended or increased as a result of climate impacts. Operators areencouraged to provide additional data on how they will ensure that their ships will be able to continue operating in
the conditions that will result from climate change.
Having identified the risks that might cause an asset to be not fit-for-purpose, issuers are then welcome to provide
information on the measures that can adopted to improve the ship’s resilience to climate change.
Potential Adaptation Measures in response to Extreme Heat include:
1. Heat resistant construction and materials
2. Continuous inspection, repair and maintenance
3. Monitoring of infrastructure temperatures
4. Reduced cargo loads, speed and frequency of service
5. Refrigeration, cooling and ventilation systems
6. Insulation and refrigeration
7. Modal Shift
8. Transit management scheme and navigation of northern regions
9. Ships design, skilled labour and training requirements
10. Upgrading of infrastructure parameters in UNECE agreements on pan-European rail, road and inland
waterway and combined transport networks
Potential Adaptation Measures in response to Extreme Weather Conditions include:
1. Integrate emergency evacuation procedures into operations
2. Barriers and protection structures
3. Monitoring of infrastructure conditions
4. Prepare for service delays of cancellations
5. Strengthen foundations, raising dock and wharf levels
6. Smart technologies for abnormal events detection
7. Improved ship design
CBI AREG Principles 4 & 5: Addressing resilience benefits
International shipping can impact the health of our ocean ecosystems and their ability to absorb and recuperatefrom climate and other environmental stress. In addition to climate change mitigation criteria, this section considers
whether ships must meet a minimum threshold for reducing the risks posed to system resilience, and also explore
instances where a ship provides a substantial contribution to system resilience that it may be derogated from themitigation criteria.
From an environmental systems-resilience perspective, ships can pose a climate resilience risk if, for example,
shipping activity is conducted near vulnerable ecosystems which provide ecosystem services, such as mangrove
forests offering flood defence services. While CBI recognises the immense significance of marine life and ecosystems
and supports future efforts to incorporate these factors into investment guidelines, it was determined that existing
IMO regulations provide a sufficient standard for the environmental responsibility and stewardship within shipping
sector. And it was therefore deemed unnecessary at this stage to require such reporting from issuers.
Examples of conventions that help to reduce the shipping sector’s impact on the environment include: theInternational Convention for the Prevention of Pollution from Ships (MARPOL); the International Convention for the
Safety of Life at Sea (SOLAS); the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other
40

Matter; the Protocol on Preparedness, Response and Co-operation to pollution Incidents by Hazardous and Noxious
Substances (OPRC-HNS Protocol); the International Convention on the Control of Harmful Anti-fouling Systems on
Ships (AFS), and the International Convention for the Control and Management of Ships' Ballast Water andSediments.
On the other hand, the ships that are within scope of these criteria typically provide a transport service for goods
and people. It follows that ships which can load and unload without port access or landside support can provide a
resilience benefit as this would facilitate the flow of goods and people, even following climate change-related
disasters or emergencies. Another example of ships that might provide a resilience benefit are ice breakers, which
can enable access to hard-to-reach locations and provide access to communities or critical waterways. In both cases
the ship provides a resilience service, the first example is a technical capability that allows it to be resilient, the otheris a specific service offered by the ship.
While these anecdotal cases were useful for highlighting how ships can provide a resilience benefit, there wasinsufficient evidence to suggest that additional benefit of these examples was sufficient to award certification
without meeting the mitigation criteria.
As such, there is no requirement to meet AREG Principles 4 & 5 at this stage in the Shipping Criteria. This derogation
will be subject to periodical review.

41Appendix 5: Summary of public consultation
Feedback Summary
Exclusion of fossil fuel carriers
Excluding fossil fuel carriers
reduces the effectiveness ofthese criteria in helping fossil
fuel carriers (which represent
a significant portion of the
global fleet) decarbonise.
Furthermore, excluding LNG
transport also limits thetransitions across the energy
systems because LNG can beused as a bridging fuel.
Finally, dry bulk vessels canalso be used to transport coal.
So the draft criteria suggestthat while there might not begreen bonds for LNG ships,
there might for coaltransporting ships.
Ambition of Trajectory
The criteria are too ambitious,
they are not aligned with the
IMO, and there are no realistic
opportunities for a ship to be
net-zero emissions today.

Choice of Metrics
EEOI and AER metrics do notaccount for the full life cycle
emissions of fuels. This does
not treat all fuels equally.

Inclusion of logistics
infrastructure
Reefer units contribute to
global warming throughincreased energy consumption
and leakage of greenhouse

Feedback Response
We recognize that LNG vessels and crude carriers represent a significant
portion of the world’s fleet, excluding them from Certification is a missed
opportunity to transition this sector.
However, the CBI Standard and Certification scheme is designed toprovide a binary label on what assets are (or are not) aligned with theParis Agreement. Such assets are simply not aligned with the Paris
Agreement.
CBI has a blanket ban on assets and activities that are dedicated tosupporting the fossil fuel sector. Currently, dedicated fossil fuel carrying
vessels are excluded because such assets do not provide a substantial
contribution to the Paris Agreement.
The criteria are reviewed biennially, this exclusion can be reviewed if
there is evidence that such assets can also be used to support activities
that are aligned with the Paris Agreement.
We have also expanded the ban on dedicated fossil fuel carriers toinclude a criteria for screening out dry bulk vessels which would be used
to transport coal.
The linear decline/slope is a function of both the climate science which
defines what would be required for a proportionate response by shippingto the overall mitigation challenge across the whole economy and thepotential pathway for GHG reduction in the shipping sector.
Temperature rise is a function of cumulative emissions. The pathway ofemissions reduction is therefore as important as the year in which zero
emissions is reached. The commonly referenced target (for all sectors) of
zero emissions before 2050 is only aligned to the Paris Agreement
temperature goals if accompanied with a high rate of reduction to thattarget.
Well-to-wake metrics have their benefits. However, such metrics are
currently unavailable. The CBI criteria require measurement, notestimation of emissions. Such measurement is not currently available forthe upstream emissions associated with the different energy systems
that the transition will require.
That said, the shipping criteria will be reviewed on a biennial basis andwill be updated as more evidence becomes available.
While recognizing that these assets offer a significant decarbonization
opportunity they have not been included within the scope of the shipping
criteria because they are an asset which transcends across multiple
transport modalities.

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gasses, these have not been
included in the criteria.
Clarity on Threshold
The exact requirement needs
to be made clearer. What is
the threshold for each classand size of ship?
Managed Reduction Plans
The requirements of the MRPs
is unclear, due to the noveltyof this document. How will
issuers be judged on their
MRPs?

Reefer units, as well as land-side port infrastructure and other logistics
terminals will be reviewed as part of updates to our overall transport
criteria.
Issuers are required to show that each asset targeted for the Use ofProceeds from a Certified bond, is operating below the emissions
intensity threshold in each respective year that the bond is outstanding.

The MRP seeks to encourage issuers to continue their decarbonisation
efforts throughout the operating life of an asset, even after the Certified
bond matures.
We are concerned that issuers might Certify a bond which matures wellbefore the end of the asset’s operating life, and that the asset’s
emissions intensity will stop decreasing to zero by 2050.
To that end, we have provided five questions which issuers must answer.
These responses would constitute the issuer’s ‘MRP’. Submission of an
MRP is mandatory but given the novelty of this document we are (at thisstage) unable to point to ‘best practice’. We expect that over time, as thevolume of Certified bonds grows, we will be able to provide moreguidance on what is required. This will be reviewed biennially.
To clarify, we will not at this stage, withhold certification on the basis of
an MRPs quality, provided that the relevant information is madeavailable by the issuer.

Clarity on BioLNG
BioLNG presents anopportunity for issuers to cut
emissions without incurring
major costs. What is the
Shipping Criteria’s position of
BioLNG?

BioLNG provides a significant opportunity to reduce emissions from theshipping sector. However, there is a substantial challenge in ensuring that
BioLNG is sourced from feedstocks and practices that contribute toclimate mitigation. The production of energy crops (primary bioenergy) is
well known to contribute to climate change through deforestation andland-use change.
To ensure that the Shipping Criteria enable rapid decarbonization of theshipping sector without simply shifting emissions to other areas, we will
only deem BioLNG which is produced from Advanced Bioenergy sources
as eligible.
We derive the definition of Advanced Bioenergy from the EU Renewable
Energy Directive II (2018/2001/EU).
Issuers who reference the use of Advanced Bioenergy in their MRPs areencouraged to submit certificates of origin where available, to prove that
BioLNG used in their operations reflects the ambition of these criteria.

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