Sustainability concerns have rocketed up the shipping agenda over the past decade, with environmental, social and corporate governance (ESG) issues already influencing financing decisions, fleet renewal and regulatory change across the industry, according to a survey by Watson Farley & Williams.
According to a series of interviews and a global survey of 545 senior industry actors, WFW find that decarbonisation of shipping is by far the most complex and pressing area. Most of the focus to date has been on the ‘E’ in ESG, but the ‘S’ (Social) and ‘G’ (Governance) elements also present growing challenges to the industry in areas such as transparency, diversity and crew welfare.
Some of these problems, according to WFW, are down to simple organisational choices, but the environmental challenge, mainly the reduction of CO2 emissions, is too large for any one company, even any one set of stakeholders, to address.
There are significant technological, financial and regulatory hurdles to clear before shipping has a viable path towards the International Maritime Organisation’s goal of 50% lower greenhouse gas emissions by 2050, including the recurring question of who shoulders the risk and cost of developing new technologies
In addition, shipping faces structural upheaval. Longstanding pressures on smaller shipowners to consolidate may become difficult to ignore in the pursuit of a sustainable industry, while the privacy traditionally embraced by sections of the industry may come under pressure from demands for greater transparency from investors, lenders, regulators and customers.
Moreover, the survey finds that 62% of shipowners are likely or very likely to form joint ventures to fund innovation in the next five years, while its highlights can be summarized in six key findings:
- Reducing carbon emissions is the main and most immediate challenge, though trade tensions, Covid-19 and access to finance are also important;
- Financiers attach more importance to sustainability issues than operators do;
- Despite commitment to sustainability, traditional ship finance banks have a limited appetite for funding new clean-technology upgrades themselves – or accommodate their financing by others;
- Decarbonisation looks set to drive greater cooperation among industry participants;
- Industry looks to governments to lead the funding of clean technology and fuel research;
- Shipowners are wary of committing to many new green technologies.