COSCO Shipping Energy Transportation (CSET), the oil and gas shipping unit of COSCO Shipping Group, has signed up for the first syndicated shipping loan in China linked to environmental, social, and corporate governance performance.
The CNY1.5bn ($206m) three-year loan was agreed with the Bank of China’s Shanghai Branch and COSCO Shipping Financial Co.
The deal will see an independent third party, China Chengxin Green Finance Technology, a subsidiary of China Chengxin International Credit Rating, assess and verify CSET’s performance on ESG targets, which will then be applied by the lenders for interest rate reductions.
Last year’s sustainability report from the World Benchmarking Alliance (WBA) and non-profit CDP covering 90 major transport companies from around the world found that of the 17 shipping companies surveyed, COSCO was the worst performer.
COSCO said the loan for its energy shipping arm, which sports a fleet of over 150 crude and product tankers and stakes in some 70 LNG carriers, represents “an important measure to promote the green and low-carbon transformation and development of the shipping industry and promote corporate ESG governance”.
Sustainable finance has risen quickly in recent years, with an increasing number of institutional investors and funds incorporating various ESG investing strategies. This expansion has been fueled by shifts in demand throughout the banking ecosystem, driven by the pursuit of better long-term financial value as well as better alignment with values.
Earlier this year, China’s Bocomm Financial Leasing launched its first ESG-linked ship financing project with Standard Chartered Bank and Industrial and Commercial Bank of China (ICBC) for an LNG carrier.