Lower margins are tied to companies' climate performance rather than to low-carbon assets.

Lenders are likely to face significant financial risks from the shift to a low-carbon economy, but it remains unclear whether such risks are incorporated into their lending practices. The extent of this risk depends on whether banks incorporate such risks into their lending activity and whether financial instruments' tenors are long enough to cover the period when such risks materialize. Using a case study of shipping loans, we combine quantitative data and semi-structured interviews with key shipping debt providers. Our results show that banks, in particular signatories of the Poseidon Principles, a voluntary disclosure initiative in shipping, have started to price in the climate score of shipowners they lend to after the Paris Agreement but on a corporate rather than an asset basis. However, signatories do not differentiate their margins based on a ship's carbon intensity, despite a relatively long loan maturity, reinforcing the limitations of disclosure initiatives to influence investment outlays.