In the latest GREEN4SEA Virtual Forum, the importance of environmental, social, and corporate governance (ESG) was highly stressed. Mr. Konstantinos Papoutsis, Euronav’s Sustainability Manager gave a presentation to touch upon the disclosing of ESG data performance and shipping finance regulation and initiatives taken by the industry and beyond.
owadays, ESG is taken more and more attraction in shipping. Considering that shipping is responsible for almost 90% of the volume of the global trade but only emits 2.5 – 3% emissions, it could be considered as the most sustainable transportation mode in the world. ESG performance is correlated to shipping industry risks, such as pollution incidents, financial loss or reputation. In essence, ESG fuels shipping unleashing its dynamics, as the components of the modern shipping policy and strategy include focus on decarbonization, climate change, environmental regulation, safety, and wellbeing, especially on board.
In this context, Mr. Papoutsis said that Euronav has two main assignments:
#1 Support the company in building its own decarbonization trajectory
#2 Frame the existing ESG legacy of the company and then build a future looking framework and implementation plan to support it.
Citing a survey conducted by Deloitte in 2021, Mr. Papoutsis noticed that the majority of the organizations publish sustainability reports on an annual basis. In particular, 63% of shipping companies investigated in the survey sample, were found that they are releasing ESG reports.
Bulk sector is a little bit more active regarding disclosing ESG performance but nevertheless, the rest shipping sectors are very powerful as well
According to data on the stock market, shipping companies that take responsibility on the impact that they have on society and on environment, and also report it, seem to outperform the companies that are not very purposeful to that regard. This trend of the outperformance is mostly highlighted and emphasized in Asia and Pacific markets where ESG companies outperform the rest of the market by approximately 50%. In Europe the corresponding performance is 7% and in US there is a similar trend. A recent HSBS analysis demonstrated that companies with high ESG ratings were more resilient regarding the economic shock caused by the COVID-19 lockdowns.
According to a Morgan Stanley study in 2021, the tanker sector is releasing more and more ESG data which means that it measures or reports strategy governance, engagement, innovation etc.
We should not overlook that the rest of the shipping sector is also very conscious on that and tries to communicate good performance to its companies
Regarding the transparency through ESG performance disclosure, Mr. Papoutsis said that there is a trend that incorporates orientated disclosure because of the stricter regulations either in Europe or in US. Companies have internally initiated practices to report in a carbon disclosure project, be rated by a system analytics and be proud members of coalitions. This is expected to be emphasized in the next couple of years where more guidelines will be released regarding the reporting requirements for shipping companies.
Talking about shipping finance, Mr. Papoutsis said that there is a transformation going through on ESG. ‘’This can have different formats. It can have the format of regulation, like EU taxonomy which defines green economic activities, sustainable finance disclose regulation, financial perspectives (carbon tax, or carbon pricing). We’ve seen coalitions made mainly by financing institutions to agree on disclosing the climate aligned shipping portfolios as well. It has to do with the EU funding and relevant opportunities in the EU sector. Companies tend to link with ESG KPIs and targets. This is measured by independent verifiers.” he said.
In the recent years, there has been reported different sustainability framed financial interaction growing rapidly.
In the Q2 of 2021 we’ve seen more than 31 billion dollars channeled in businesses worldwide through the issuance of green bonds for instance, setting to achieving GHG targets. We’ve seen more and more the reality of the green financing kicking in
Referring to Euronav, he said that the company is leading by itself the data collection and reporting of ESG performance. The company is very well positioned for the upcoming regulations which will be stricter. It is only for the benefit of each organization to be able to report ESG data, to put in motion the ESG frameworks and to be able to report it when asked.
Closing his presentation, Mr. Papoutsis made some open-ended question for the future of the shipping industry regarding the ESG. “How will more energy efficient and ESG friendly shipping companies can obtain a competitive advantage? How can we make sure that all these efforts provide a competitive advantage to our organizations against other that do not take responsibility?”
Also, we see the ever-increasing role of Asia in shipping finance, and we need to understand the extent to which these financial institutions will really embrace ESG frameworks and to which level
…he noted, concluding that it would be good to discuss further the ability of investors to assimilate the ESG pillars and to understand whether and how these will lead in the long term the overall improvement.
Explore more by watching the video below
Above article is a transcript text of Mr. Papoutsis presentation during 2022 GREEN4SEA Forum.
The views presented are only those of the author and do not necessarily reflect those of SAFETY4SEA and are for information sharing and discussion purposes only.