Atlas : Blue Transition Bond Second Party Opinion (Sustainalytics)

Second-Party Opinion

Seaspan Blue Transition Bond Framework

Evaluation Summary

Green Bond Principles 2021

Sustainalytics is of the opinion that the Seaspan Blue Transition Bond Framework is credible and impactful and aligns with the four core components of the Green Bond Principles 2021 administered by ICMA. The eligible categories for the use of proceeds - Alternative Fuel Containerships and Marine Vessel Energy Efficiency

• are aligned with those recognized by the Green Bond Principles and will reduce the environmental impacts of the shipping industry. Sustainalytics specifically considers investments in LNG-powered ships and related expenditures to be a viable option for the low-carbon transition of the shipping sector.

Climate Transition Finance Handbook 2020

Sustainalytics has evaluated Seaspan's transition governance, strategy, decarbonization targets, and intentions to report on transition progress, and finds the Company to be partially aligned with the recommendations of the Climate Transition Finance Handbook 2020. Seaspan has adopted the International Maritime Organization's emission reduction targets, which are considered by Sustainalytics to be acceptable given that, although they do not fully align to a two-degree climate scenario, they have been adopted by a credible international organization.

Evaluation Date	June 28, 2021
Issuer Location	Hong Kong, China
	Vancouver, Canada

The Use of Proceeds contributes to the following SDGs:

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Second-PartyOpinion: Seaspan Blue Transition Bond Framework

Table of Contents
Scope of Work and Limitations ..............................................................................................................................	3
Introduction ...........................................................................................................................................................	4
Sustainalytics' Opinion ..........................................................................................................................................	4
Section 1: Sustainalytics' Opinion on the Alignment of the Framework with Relevant Market Standards................	4
Section 2: Assessment of Seaspan's Sustainability Strategy ......................................................................................	8
Section 3: Impact of Use of Proceeds..........................................................................................................................	10
Conclusion...........................................................................................................................................................	11
Appendix 1 ..........................................................................................................................................................	12
Disclaimer ...........................................................................................................................................................	18
About Sustainalytics, a Morningstar Company.....................................................................................................	19

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Second-PartyOpinion: Seaspan Blue Transition Bond Framework

Scope of Work and Limitations

Sustainalytics' Second-Party Opinion reflects Sustainalytics' independent1 opinion on the alignment of the reviewed Framework with the current market standards and the extent to which the eligible project categories are credible and impactful. As part of the Second-Party Opinion, Sustainalytics assessed the following:

• The Framework's alignment with the Green Bond Principles 2021 as administered by ICMA;
• Seaspan's alignment with the recommendations of the Climate Transition Finance (CTF) Handbook 2020;
• The credibility and anticipated positive impacts of the use of proceeds2; and
• The alignment of the issuer's sustainability strategy and performance and sustainability risk management in relation to the use of proceeds.

As part of this engagement, Sustainalytics held conversations with various members of Seaspan's management team to understand the sustainability impact of their business processes and planned use of proceeds, as well as management of proceeds and reporting aspects of the Framework. Seaspan representatives have confirmed that:

1. They understand it is the sole responsibility of Seaspan to ensure that the information provided is complete, accurate or up to date;
2. They have provided Sustainalytics with all relevant information; and
3. Any provided material information has been duly disclosed in a timely manner.

Sustainalytics also reviewed relevant public documents and non-public information. This document contains Sustainalytics' opinion of the Framework and should be read in conjunction with that Framework. Any update of the present Second-Party Opinion will be conducted according to the agreed engagement conditions between Sustainalytics and Seaspan.

Sustainalytics' Second-Party Opinion, while reflecting on the alignment of the Framework with market standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market standards. Furthermore, Sustainalytics' Second- Party Opinion addresses the anticipated impacts of eligible projects expected to be financed with bond proceeds but does not measure the actual impact. The measurement and reporting of the impact achieved through projects financed under the Framework is the responsibility of the Framework owner.

In addition, the Second-Party Opinion opines on the potential allocation of proceeds but does not guarantee the realised allocation of the bond proceeds towards eligible activities.

No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as being a statement, representation, warrant or argument, either in favour or against, the truthfulness, reliability or completeness of any facts or statements and related surrounding circumstances that Seaspan has made available to Sustainalytics for the purpose of this Second-Party Opinion.

For inquiries, contact the Sustainable Finance Solutions project team:

Zach Margolis	Ijeoma Madueke	Andrew Johnson	Molly Stern
Project Manager	Project Support	Project Support	Client Relations
[e-mail]	[e-mail]	[e-mail]	[e-mail]
([phone]	([phone]	([phone]	([phone]

1. When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management framework that specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research (and engagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specific commercial outcomes. One of Sustainalytics' hallmarks is integrity, another is transparency.
2. For the use of proceeds assessment, Sustainalytics relied on its internal taxonomy, version 1.8, which is informed by market practice and
   Sustainalytics' expertise as an ESG research provider.

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Introduction

Seaspan Corporation ("Seaspan", the "Company", or the "Issuer") is the largest independent containership lessor in the world. Seaspan charters vessels primarily on long-term,fixed-rate time charters to the world's largest container shipping companies and has an operating fleet of 127 containerships, as of March 31, 2021. Headquartered in Hong Kong, with global offices in Vancouver and Mumbai, the Company has approximately 5,000 employees globally.

Seaspan has developed the Seaspan Blue Transition Bond Framework (the "Framework") under which it intends to issue transition bonds and use the proceeds to finance and/or refinance, in whole or in part, existing and/or future projects that facilitate the transition of the Company's operations to a low-carbon economy. The Framework defines eligibility criteria in the following areas:

1. Clean Transportation:

1. Alternative Fuel Containerships
2. Marine Vessel Energy Efficiency

Seaspan engaged Sustainalytics to review the Seaspan Blue Transition Bond Framework, dated July 2021, and provide a Second-Party Opinion on the Framework's environmental and social credentials, its alignment with the Green Bond Principles 2021 (GBP)3 and alignment with the recommendations of the Climate Transition Finance (CTF) Handbook 2020.4 This Framework will be published in a separate document.5

Sustainalytics' Opinion

Section 1: Sustainalytics' Opinion on the Alignment of the Framework with Relevant Market Standards

Alignment with Green Bond Principles 2021 (GBP)

Sustainalytics is of the opinion that the Seaspan Blue Transition Bond Framework is credible, impactful and aligns with the four core components of the GBP. For detailed information please refer to Appendix 1: Green Bond Programme External Review Form. Sustainalytics highlights the following elements of Seaspan's Blue Transition Bond Framework:

Use of Proceeds

Overall Assessment of Use of Proceeds

	Use of Proceeds		Activity	Classification	Sustainalytics' Assessment
	Clean		Containership new	Green/	- Newbuild containerships financed in the short term will
	Transportation -		builds	Transition	be LNG dual-fuel vessels.6 Sustainalytics considers LNG
	Alternative Fuel				to be an interim solution that can contribute to the
	Containerships				decarbonization of the shipping sector and thus to be a
					transition activity.
					- LNG has the potential to achieve emissions reductions
					of up to 25% compared to conventional fuels, while
					biofuels provide a range of reductions which could, in

1. The Green Bond Principles are administered by the International Capital Market Association and are available at:https://www.icmagroup.org/assets/documents/Sustainable-finance/2021-updates/Green-Bond-Principles-June-2021-140621.pdf
2. The Climate Transition Finance Handbook is administered by the International Capital Market Association and is available at:https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/Climate-Transition-Finance-Handbook-December-2020-091220.pdf
3. The Seaspan Blue Transition Bond Framework is available on Seaspan's website at:https://www.seaspancorp.com/sustainable-financings/
4. LNG dual-fuel vessels have the capacity to run on either conventional liquid marine fuels (LFO, HFO or liquid bio fuel) or LNG switching between fuels as required.

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					theory, reach 100%; and hydrogen and hydrogen-derived
					fuels may provide near-100% reductions depending on
					the source of energy inputs.
					- Seaspan's internal modeling predicts that, all else being
					equal, a newbuild containership with an LNG-powered
					propulsion system will be able to remain below the IMO
					trajectory for approximately eight years longer5 than an
					equivalent conventional-fueled vessel. This provides an
					additional window for further technological
					development, including the deployment of lower-carbon
					fuels.
					- Vessels eligible to be financed under the Framework
					may, in the long term, include those with zero or very
					low emissions such as hydrogen-powered ships. Such
					investments would be viewed as a green activity.
	Clean		Refurbishments	Transition	- The refurbishment or retrofit of existing vessels to
	Transportation -				support LNG or other lower-carbon propulsion systems
	Marine Vessel				is considered to be a credible transition activity.
	Energy Efficiency		Improving physical	Green/	- Investments in improving the performance of vessels
			design efficiency of	Transition	through improved physical design characteristics7 are
			new/existing ships		viewed by Sustainalytics as transition activities, as
					these features will be, in the short term, implemented
					on vessels powered by LNG. It is acknowledged that
					physical design improvements can, in the future,
					provide efficiency benefits to vessels powered by low-
					carbon fuels, which would be viewed as a green activity,
					and as such that there is no "fossil fuel lock-in"
					associated with these investments.
			Shore-to-ship power	Green	- By connecting to electrical grids while in port, vessels
			(alternative		can avoid use of auxiliary generators. This
			maritime power or		electrification, which results in zero direct emissions, is
			"cold ironing")		considered to be an activity in line with green bond
					market practice.
			Research and	Green/	- Sustainalytics considers expenditures that aim to
			development	Transition	enable the future use of low- or zero-carbon fuels, such
					as hydrogen or ammonia, to be in line with green bond
					market practice.
					- Sustainalytics considers expenditures in relation to the
					development of LNG vessels to be a transition activity.

• The eligible categories of the Framework aim to address one of the five key tipping points of the UN Global Compact Blue Bonds Reference Paper, namely "Set Sail For Zero".

Commentary on Transition Use of Proceeds

• Sustainalytics recognizes the marine shipping sector as well-suited for transition finance, as it is carbon-

intensive, important for the economy and human needs, and faces technological barriers to rapid decarbonization.

• Sustainalytics notes that the nature of Seaspan's business model is to serve as lessor; and the Company does not operate vessels. This limits the Company's capacity to directly impact various factors that affect vessel emissions performance such as speed, route selection, fuel choices, which are determined by the vessel operator (the charterer). Consequently, while there are significant carbon emissions resulting from assets owned by the Company, these may not be considered "operational" emissions from Seaspan's perspective, which puts a greater degree of emphasis on vessel technology (e.g. design and propulsion) as the driver of enabling emissions reductions. These technological factors are appropriately addressed by the Issuer's transition approach.

7 Seaspan will use accepted metrics to assess vessel efficiency, namely the Energy Efficiency Design Index (EEDI) and Existing Vessel Design Index (EVDI) and aims ensure compliance with IMO targets in these areas.