Odfjell contributes to maritime industry’s transition finance

Norwegian shipping company Odfjell has made an important step on its decarbonization journey by introducing a transition finance framework.

The initiative is a first in the Nordic region and is said to solidify the shipping company’s position ‘at the forefront’ of sustainable finance practices.

Odfjell has worked actively to reduce emissions for more than a decade. This work has led to documented results, positioning the chemical tanker operator among sustainability leaders in the international shipping industry. The company is now taking another proactive step toward reaching its ambitious climate targets by releasing a customized transition finance framework aimed at supporting the funding of its transition.

The framework has been developed with support from DNB — Norway’s largest bank — as transition finance advisor.

“As the focus on reducing climate footprints grows across industries worldwide, so do the expectations for transition plans and concrete actions from banks and investors. We appreciate this strong interest from our funding sources and have decided to respond by piloting a new financial instrument,” Henriette K. Bergesen, Finance Manager at Odfjell, commented.

As explained, the framework serves as a holistic approach to transition investments, capturing both small and large decarbonization projects in which Odfjell intends to invest. The framework can be used for both bonds and loans and adheres to the latest industry guidelines for use-of-proceeds instruments and transition financing.

“This commitment serves as a strategic roadmap for our investments in emission-reduction activities and is a proactive measure in our transition strategy. It ensures accountability in utilizing financial resources, ensuring that the funds invested in us go to eligible projects linked to our transition plan,“ Bergesen added.

The framework encompasses a wide range of energy-efficiency initiatives that will support Odfjell’s journey towards a climate-neutral fleet in 2050.

The company said that the participating financial institutions will also benefit from Odfjell’s commitment to transparency and see their funds being directed towards a wide range of initiatives aimed at emission reduction, such as vessel-specific retrofits, R&D activities, wind-assisted ship propulsion (WASP) technology, zero-emission capable newbuilds, and vessel life-extension program.

The framework has already proven its effectiveness in a recent transition finance loan facility together with a refinancing for six supersegregators, at historically attractive terms, demonstrating the banking sector’s enthusiasm for supporting transition investments.

According to Odfjell, the framework adheres to the latest guidelines set by the ICMA in its Climate Transition Finance Handbook 2023 and is verified by DNV.

“As a Second Party Opinion provider for Odfjell’s Transition Finance Framework, we are delighted to have played a role in supporting their sustainability journey. We look forward to following Odfjell’s progress and further contributions to the maritime industry’s transition finance and positive climate impact,” Ingebjørg Nueva Finnebråten, DNV’s Green Finance Lead Nordics, said.

The transition finance framework complements Odfjell’s successful sustainability-linked finance framework, which was the first of its kind in the shipping industry when first issued in 2021.

“Capital markets play an important role in the decarbonization of shipping. By issuing this new framework, we hope to contribute to the development of sustainable financing and set a high standard for climate initiatives in the shipping industry for others to follow,” Gustav Sannem, VP Finance at Odfjell, concluded.