Sustainability has moved from the margins of maritime finance to its very centre. Today, no serious financing discussion in shipping happens without reference to emissions, ESG alignment, or transition pathways. Yet as green capital accelerates into the sector, so do concerns around credibility, consistency, and consequences.

The risk is no longer that shipping fails to access green finance. The risk is that it accesses it poorly, under misaligned assumptions, weak data, or superficial claims that unravel under scrutiny.

This fourth SFTC editorial examines one of the industry’s most pressing questions: how can shipping finance the green transition without falling into the trap of greenwashing? By combining insights from Financial Strategies in a Volatile World and Developing Financial Tools to Sustain Support for the Green Transition, it explores how risk, regulation, and capital discipline must evolve together.

Green Finance Has Grown Up. Expectations Have Too.

In its early days, green finance in shipping focused on intent. Demonstrating ambition, committing to future targets, and aligning with high-level sustainability narratives were often enough to unlock preferential terms.

That era is ending.

Today’s lenders, investors, and regulators are demanding:

• Verifiable emissions data
• Clear baselines and benchmarks
• Transparent methodologies
• Ongoing performance tracking

Green finance is no longer about labels. It is about outcomes and accountability.

For shipowners, this marks a shift from storytelling to systems. Access to sustainable capital increasingly depends on the ability to measure, report, and improve performance consistently over time.

The Rising Financial Cost of Greenwashing

Greenwashing is often framed as a reputational issue. In reality, it is becoming a material financial risk.

As regulatory scrutiny increases and ESG claims are examined more closely, misalignment between stated sustainability goals and operational reality can trigger:

• Margin penalties in sustainability-linked loans
• Covenant breaches
• Loss of access to future capital
• Reputational damage that affects chartering relationships

Financial institutions are acutely aware of this risk. Many are now reassessing sustainability-linked structures signed only a few years ago, questioning whether KPIs were sufficiently robust or forward-looking.

At SFTC, the discussion around greenwashing is not accusatory. It is practical. How do we design finance that rewards genuine transition without incentivising box-ticking?

Regulation Is Catching Up, Fast

Regulatory oversight of sustainability claims is intensifying across jurisdictions. What was once governed largely by voluntary principles is now moving into enforceable territory.

Key trends shaping maritime finance include:

• Tighter disclosure requirements
• Greater alignment between financial and non-financial reporting
• Increased scrutiny of carbon offset mechanisms
• Cross-border inconsistency in enforcement standards

For shipping, this creates a complex compliance environment. A financing structure considered robust in one jurisdiction may be questioned in another.

The implication is clear: regulatory risk must now be factored directly into green finance structures. This includes scenario planning for changing definitions of “green” and stress-testing financial models against stricter disclosure regimes.

SFTC’s focus on regulatory scrutiny highlights the need for alignment between policy intent and financial execution.

Poseidon Principles: Commitment or Compliance?

The Poseidon Principles have become one of the most influential frameworks linking ship finance to climate alignment. Yet as adoption grows, so does debate around their effectiveness.

Key questions now facing the industry include:

• Are institutions using the Principles as a genuine risk tool or a reputational shield?
• How consistent is data quality across portfolios?
• Do the Principles sufficiently account for transition pathways, not just end states?

For shipowners, alignment with the Poseidon Principles can unlock access to capital. But it also exposes them to greater transparency and performance comparison.

The real test is not whether shipping is “sticking with the plan”, but whether the plan is being used to inform better capital allocation decisions, rather than retroactively justify them. 

Financing Retrofits: The Most Underrated Transition Lever

While newbuilds dominate headlines, the majority of the global fleet will decarbonise, if at all, through retrofits.

Financing retrofits presents unique challenges:

• Uncertain payback periods
• Vessel-specific performance outcomes
• Dependency on operational behaviour
• Interaction with future regulatory requirements

Yet retrofits also offer some of the most immediate emissions reductions per dollar invested.

Capital providers increasingly recognise this, but only when retrofit proposals are backed by credible data and realistic assumptions. Overstated savings projections are a common source of greenwashing risk.

SFTC’s exploration of retrofit finance focuses on how financial tools can be structured to share performance risk fairly between owners and financiers.

Carbon Markets: Opportunity With Caution

Emerging carbon markets hold promise as a mechanism to support the green transition. However, they also represent one of the most sensitive areas for credibility risk.

Key concerns include:

• Variability in credit quality
• Lack of standardisation
• Double-counting risks
• Unclear long-term pricing signals

For financiers, carbon revenues are rarely treated as primary repayment sources. Instead, they are viewed as supplementary and volatile, requiring conservative assumptions.

The development of robust, transparent carbon markets will be critical if they are to play a meaningful role in ship finance. Until then, overreliance on offsets risks undermining both financial and environmental integrity.

Assessing the Financial Risks of Transition

Perhaps the most important shift underway is how transition risk itself is assessed.

Rather than asking whether an asset is green today, financiers are increasingly asking:

• How adaptable is this asset to future regulation?
• How credible is the owner’s transition strategy?
• How resilient is cash flow under carbon pricing scenarios?

This reframing benefits neither complacency nor perfectionism. It rewards realism, flexibility, and transparency.

Green finance that ignores operational constraints creates fragility. Conservative finance that ignores transition risk creates obsolescence. The balance lies in credible pathways, not absolute claims.

Why This Conversation Defines the Next Decade

The green transition will reshape shipping whether capital supports it wisely or not. The difference will lie in who bears the cost of misalignment.

Shipowners face the risk of stranded assets. Financiers face the risk of mispriced loans. Regulators face the risk of eroding trust if frameworks lack clarity.

The SFTC Conference provides a vital platform to confront these challenges openly. By bringing together shipowners, lenders, investors, and regulators, it enables a shared understanding of how to finance decarbonisation with integrity.

Register for the SFTC Conference to engage in candid discussions on green finance, regulatory scrutiny, and risk allocation, and to ensure your organisation is positioned on the right side of the transition.

In a world where sustainability claims are easy to make but hard to defend, credible finance will belong to those who align capital with reality.