EU Taxonomy
- The European Union
Introduction
The taxonomy is a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050 and the broader environmental goals other than climate. It allows companies to share a common definition of economic activities that can be considered environmentally sustainable.
Höegh Autoliners acknowledges the 2023 introduction of four new environmental objectives increasing the current scope to cover six objectives. For our 2023 reporting, we will continue to do our screening against Climate change mitigation as this is assessed to be most relevant to our business strategy and decarbonisation journey.
The six environmental objectives of the Taxonomy are
1. Climate change mitigation
2. Climate change adaptation
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity and ecosystems
Eligible economic activities
We have performed a high-level screening of the economic activities carried out as part of the Group’s operations to get an overview of which of the activities that should be included for the taxonomy reporting. Only the activities representing key aspects of our operations are included to ensure meaningful and impactful reporting, and our shipping activity is the only activity in focus for this year’s reporting. Our shipping operations are represented through activity 6.10 in the taxonomy regulations. Taxonomy-eligible share of revenues, Capex and Opex was very high for both 2022 and 2023, indicating a big potential to substantially contribute towards climate change mitigation. Our decarbonisation journey is still in its beginning, which is confirmed in the share of taxonomy aligned share of the same KPIs.
Aligned economic activities
Höegh Autoliners has assessed taxonomy-aligned economic activities in accordance with the technical screening criteria as defined in the Climate Delegated Act. None of the vessels in our existing fleet has an attained Energy Efficiency Design Index (EEDI) below the required thresholds. The way we interpret the regulations, Energy Existing Ship Index (EEXI) cannot be used as a substitute for EEDIs for vessel built before 2013, and that attained EEDI values for these vessels may be provided on a voluntary basis. Höegh Autoliners has decided not to do that, ruling these vessels out of the assessment. As a result, no vessels in our existing fleet are contributing substantially to climate change mitigation and are therefore not considered aligned.
Our newbuilding program consists of 12 zero-carbon ready vessels which will meet the substantial contribution criteria upon delivery, resulting in taxonomy-aligned share of Capex if the Do no significant harm (DNSH), and minimum social safeguards criteria are met. We interpret the DNSH criteria strictly, and with the documentation we currently have in place we see some gaps in our documentation to ensure that we are not doing any significant harm to any of the environmental objectives. This relates to the following objectives: Sustainable use and protection of water and marine resources, Transition to a circular economy and Protection and restoration of biodiversity and ecosystems. For further details on this, please refer to the accounting principles. We will investigate how to close the existing gaps, enabling us to report aligned share of all KPIs when our newbuilds are delivered and entered into operations.
Höegh Autoliners Taxonomy Reporting
| 2023 | 2022 | |||
| MUSD | % | MUSD | % | |
| Revenue | ||||
| Aligned | 0 | 0% | 0 | 0% |
| Eligible but not aligned | 1 442 | 99.7% | 1 266 | 99.7% |
| Non-eligible | 4 | 0.3% | 4 | 0.3% |
| Opex | ||||
| Aligned | 0 | 0% | 0 | 0% |
| Eligible but not aligned | 40.3 | 100% | 45 | 100% |
| Non-eligible | 0 | 0% | 0 | 0% |
| Capex | ||||
| Aligned | 0 | 0% | 0 | 0% |
| Eligible but not aligned | 158.7 | 100% | 267 | 100% |
| Non-eligible | 0 | 0% | 0 | 0% |
Key Performance Indicator Reporting
EU Taxonomy Accounting Principles
Definitions and assumptions
A company’s economic activity is considered Taxonomy-eligible if it is included and described in the supplementing delegated acts to the EU Taxonomy regulation. This is irrespective of whether that economic activity satisfies any or all the technical screening criteria specified in those delegated acts and is considered by the EU as having the potential to substantially contribute to one of the environmental goals.
An economic activity is considered Taxonomy-aligned, and considered by the EU as sustainable, if it complies with the technical screening criteria as defined in the Climate Delegated Act and if it is carried out in compliance with the minimum social safeguards concerning human rights, anti-corruption and bribery, taxation and fair competition. For the activity to meet the technical screening criteria, it would need to contribute substantially to at least one environmental objective, while at the same time not doing significant harm to any of the other environmental objectives.
Economic activities that are not included and described in the supplementing delegated acts to the EU Taxonomy regulation are considered non-eligible. As they are not covered by the regulation, they cannot be classified as sustainable activities.
Eligible revenue KPI is calculated as eligible revenue/Total revenues, where Total revenues is revenue stated in Note 2 – Total revenues, which include IFRS 15 revenues consisting of net freight revenues, other surcharges and Time Charter income, but excluding terminal related income.
Eligible Capex KPI is calculated as Eligible CAPEX/Total CAPEX, where Total CAPEX refers to capitalised additions as stated in Note 7 – Vessels, newbuildings, equipment and right-of-use-assets which include additions to vessels, newbuildings, equipment and leased assets.
Eligible Opex KPI is calculated as Eligible OPEX/Total OPEX, where Total OPEX only refers to expenses related to maintenance, repairs, and short-term leases related to both eligible and non-eligible assets.
Aligned revenue KPI is calculated as aligned revenue/Total revenue.
Aligned Capex KPI is calculated as aligned Capex/Total Capex.
Aligned Opex KPI is calculated as aligned Opex/Total Opex.
Aligned revenues are represented by the revenue generated from aligned vessels during the year. Aligned Capex are represented by Capex additions to existing aligned vessels and paid instalments for our ordered zero-carbon ready vessels during the year. Aligned Opex is represented by expenses related to maintenance, repairs, and short-term leases of aligned vessels.
Do no significant harm (DNSH)
Our screening process primarily focuses on significant contributions to ‘Climate change mitigation’. However, we also evaluate our eligible activities for compliance with DNSH in relation to ‘Climate change adaptation,’ ‘Sustainable use and protection of water and marine resources,’ ‘Transition to a circular economy,’ ‘Pollution prevention and control,’ and ‘Protection and restoration of biodiversity and ecosystems.’ An activity is considered aligned only if it complies with all relevant DNSH criteria, as evidenced by our documentation. If an activity fails to meet any DNSH criteria, we consider it as eligible, but not aligned.
Minimum Social Safeguards (MSS)
Höegh Autoliners’ economic activities are conducted in accordance with the Minimum Social Safeguards criteria of the EU Taxonomy. The Group has put in place policies and procedures to protect human rights and decent working conditions, not only within our own operations, but also in our value chain. Our taxation practices are directed by our Group Tax Policy, and the foundation of Höegh Autoliners’ decision-making and stakeholder interactions is detailed in our Code of Conduct, which also covers fair competition and anti-corruption measures.
