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Leading banks are looking to restrict financing for shipowners who endanger crew welfare, after attacks on vessels in the Red Sea and other scandals drew attention to the plight of seafarers.
Executives at eight banks, including ING and Citigroup, plan to meet from October to discuss how to track clients’ commitments to safety, as well as limit lending to those that do not meet their standards.
The move follows an earlier agreement between these banks, who lend money for big investments such as shipbuilding, to report the environmental impact of shipowners in their portfolios, although this initiative has produced varied results since 2019.
The development highlights increasing concerns about the working conditions of the 1.9mn seafarers globally, who keep trade moving but spend much of their time in international waters, far from the oversight of authorities on land.
This year, some shipowners have continued to sail through the Red Sea despite missile attacks by Yemen’s Houthi militants, which the Houthis have said are in support of Gaza’s Palestinians during Israel’s war with Hamas. The heightened security fears come not long after thousands of seafarers were stranded at sea with minimal support when countries closed borders during the Covid-19 pandemic.
“Can you imagine sailing down the Red Sea, not knowing if you’re going to be hit by a missile?” said Stephen Fewster, head of shipping finance at ING, who will chair the meetings between banks that also include ABN Amro, UBS, DNB, Nordea, SMBC Bank and SEB.
“The crew members are coming from typically low-income backgrounds. It’s not like they have the luxury of saying: I’m not going. They have families to support.”
Although some shipowners are contractually obliged to go where customers tell them to, Fewster said ING would be concerned about any that chose to sail through the danger zone near Yemen, adding: “No one wants to be financing a company where crew are being frequently injured.”
The banks could insist that shipowners agreed to share a range of information before receiving loans, including the number of working days that staff lose to injury and the amount of support offered to families. Fewster said lenders could also require them to offer mental health support and internet access on board, “cutting off the supply of finance” to shipowners who do not meet their standards or offering better interest rates to those that do.
They will also consider how to track shipowners’ performance on impacting biodiversity, ethical ship recycling and gender equality. Barely 1 per cent of seafarers are female, with highly publicised allegations of sexual assault on board a vessel owned by shipowner AP Møller-Maersk having recently drawn attention to the vulnerability of these women.
The eight banks will decide which of these ideas should be pursued before making proposals to the rest of the 35 lenders who previously signed up to the Poseidon Principles, a 2019 accord to track and disclose their shipping portfolios’ alignment with climate targets.
But some have questioned the impact of this initiative, which was predominantly supported by western banks, on what is a highly international and loosely regulated industry. About a third of the lenders reported in 2023 that their portfolios were in line with their original target to halve carbon emissions by 2050.
An executive at one leading shipbroker said the Poseidon Principles were “a good soundbite” for banks. But smaller, privately owned shipowners continued to endanger staff and operate highly polluting vessels, while still accessing finance and “making a hell of a lot of money”.
Paddy Crumlin, president of the International Transport Federation, welcomed the move by banks.
“There are shipowners who don’t feel they need to be held to account for human rights and they continue to be rewarded. [These] shipowners need to be placed at an economic disadvantage.”
But he warned that many still skirt oversight by registering ships in lightly regulated countries far from their headquarters, adding that meaningful change must come from legislation. Labour rights “should be an obligation for all, with strong sanctions for failing to comply and with no space left for bad companies to be able to hide”.
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