In this video, James Mitchell, Manager at Rocky Mountain Institute discusses the climate transition risks that shipping financiers face as countries begin to implement the Paris Agreement. He also discusses how decarbonization poses a significant opportunity for financiers who understand it and mitigate for it early.
In 2017, there were 255 billion dollars loan to shipping companies. This is important because ships generally have a life span of 25 years. During these years, the industry has to be well into decarbonisation.
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However, this leads to challenges and risks for financiers. These risks are the financial implications that arise from the transition to decarbonisation. But operators that are not prepared for this transition will face a number of problems, such as:
- Impact in cash flow;
- Impact in asset value;
- Their companies will be less credit worthy.
In addition, during the decarbonisation era, countries will want less coal and oil. The effect of this will be the fact that ships that are transferring these goods, will also be in less demand.
However, decarbonisation does not only provide risks. Namely, the companies that will be ready in time will be considered as leaders and their position in the market will be strengthened.
