Financed emissions and climate alignment of an LNG carrier with regard to investment portfolio achieving net-zero for international shipping

This study investigates Scope 3 financed emissions and climate alignment in the ship finance portfolio. Financed emissions refer to greenhouse gas emissions incurred from financial flows, such as investments and loans, within the financial sector. Aligning with the IMO`s decarbonization targets, the international shipping sector should consider measures to facilitate decarbonization by measuring financed emissions. The Poseidon Principles represent the climate alignments of ship finance portfolios to support ship decarbonized. It is a voluntary initiative in the financial sector to align international shipping with the Paris Agreement. This study considers an LNG carrier to estimate the financed emissions and climate alignment with the IMO`s decarbonization trajectory. The Science Based Target initiative provides a decarbonization trajectory methodology using carbon intensity as ship energy efficiency. Because an LNG carrier is high value-added asset, it requires large-scale financing relative to other ship types. The LNG carrier financing accounts for 23% of the total ship finance volume in 2024. It implies that financed emissions and climate alignment are significant for the shipping decarbonization. The case study considers a Loan-to-Value ratio of 70% with a 25-year tenure and principal repayment without interest accrual. The financed emissions of an LNG carrier are 3.818 g-CO 2 /tonne-mile in 2023, remaining well below the required carbon intensity indicator. The vessel represents a negative value of the portfolio climate alignment from 2023 to 2030; it indicates that the IMO decarbonization targets are applicable to support the Paris Agreement. From 2031 onward, the alignment becomes positive relative to the decarbonization trajectory. • Decarbonization is a crucial issue for global shipping companies and financial institutions. • Financed emissions can establish decarbonization targets using the Science Based Target initiative methodology. • The LNG carrier financing accounts for 23% of the total ship finance volume in 2024. • Carbon intensity indicator is an appropriate emission standard for ship operational efficiency. • Financed emissions served as an indicator for the ship asset to align with the Paris Agreement.