The German bank KfW IPEX-Bank has become the first German bank to join the Responsible Ship Recycling Standards initiative.
With a lending volume of EUR 13.9 billion ($17 billion) in 2017, KfW IPEX-Bank is one of the top five ship financiers in the world, and, by joining the initiative, highlights that it is setting high standards for the environmental and social compatibility of its financing.
At the end of May 2017, ABN Amro, ING and NIBC established the Responsible Ship Recycling Standards. The initiative now has eight members worldwide, with Nordea, DNB, SEB and Export Credit Norway having joined the three founding banks.
The aim of the initiative is to incorporate scrapping clauses in accordance with international standards including the Hong Kong Convention into loan agreements. These clauses also include an obligation for shipping companies to ensure that all ships carry a Green Passport that provides an overview of all the hazardous materials on board. The aim of the initiative is for shipping companies to observe minimum standards of occupational safety and environmental protection when scrapping their ships and therefore to view scrapping as part of their own value-added chains.
The Banks using their best efforts:
(i) are not directly involved in the financing of unsustainable ship recycling facilities or the purchasers of shipping assets intended for unsustainable ship recycling (such purchasers are sometimes referred to as cash buyers);
(ii) in relation to financing transactions for new ships, agree to only finance ships that carry an Inventory. The Inventory should meet the standards as defined in the E.U. Ship Recycling Regulation;
(iii) in relation to (re)financing transactions for existing ships, require that an Inventory shall be established by the shipowners of such ships. The Inventory shall be established at the next drydocking at the latest;
(iv) will encourage clients to ensure that an Inventory is prepared and maintained for each ship in their existing fleet;
(v) recognize in their due diligence process, the applicable international standards, industry guidelines and their underlying principles to manage the E&S impacts of ship recycling. These standards, guidelines and underlying principles will form the basis for dialogue and engagement with clients on this topic;
(vi) will create awareness on sustainable ship recycling, and address the client’s approach to manage the potential negative impacts of ship recycling;
(vii) expect clients to demonstrate reasonable efforts to act in line with both the letter and the spirit of the standards, industry guidelines and their underlying principles; and
(viii) will promote the standards within the financial sector and encourage other banks to adopt them.
Even though it cannot yet be foreseen just how far the standards will take root throughout the market, Andreas Ufer, Member of the Management Board of KfW IPEX-Bank, is hoping for some tangible effects. “This is an important way to raise awareness about the significance of sustainable ship recycling. We view the Responsible Ship Recycling Standards initiative as a long-term project that will continue to develop and welcome more and more members around the world.”
The news comes as the Pakistani ship recycling market reopens for tankers, ending a near 18 month ban after a deadly explosions occurred at a Gadani yard. Tankers will now have to be totally gas free for hot works and cleaned in a similar manner to procedures used in India and Bangladesh.