When Michael Webber’s Webber Research & Advisory issued its annual scorecard on the environmental, social and corporate governance (ESG) performance of US-listed shipping companies in 2020, just 42% of them were meeting its minimum standards for carbon-emissions disclosure.
That jumped to 71% a year later, and this year’s figure is expected to be even higher.
But how well they are doing when it comes to tackling their CO2 emissions remains a question unanswered by the scorecard.
The disclosure improvement is reflective of the contours of shipping’s improving ESG profile. The industry has made significant progress in its reporting of ESG factors on which companies are increasingly judged, but there remains much more road to travel when it comes to how it delivers on improving its ESG performance.
Financial data firm Refinitiv — whose ESG ratings include scores for 44 marine freight and logistics companies — has seen the sector’s average ESG score rise from just shy of 35.2 five years ago to a score of 50 today, according to data compiled for TradeWinds.
That still puts shipping below the average score of 52 for all sectors, but the data shows the average ranking across all industries covered by Refinitiv has grown by just 9.79 points, compared with shipping’s 14.8 point improvement.
ESG trackers such as Webber Research and Norway’s The Governance Group have also seen improvements in shipping’s ESG profile.
But the industry is behind the top tier in The Governance Group’s ranking of 100 Oslo-listed companies, where none in shipping have an A grade, and only five have a B or B+.
ESG transparency vs performance
“We need to distinguish between ESG transparency and ESG performance,” said Governance Group founder Joachim Nahem, who noted that shipping can be looked at either as a glass half full or a glass half empty.
“The half-full one is definitely improvement on reporting and transparency. Half-empty is that it is a little bit of a box-ticking exercise.”
ESG stands for environmental, social and corporate governance, a set of non-financial metrics that are becoming increasingly important when analysing companies.
Amid the growth of ESG’s role in investing, there has been a public conversation in recent months about what the term actually means.
A high ESG score does not necessarily measure how ethical a company is, as Refinitiv head of research and portfolio management Leon Saunders Calvert has explained in notes to clients. It’s not a do-gooder rating.
Rather, ESG is generally seen in financial circles as a measure of the risks that a company poses on environmental, social and governance measures.
He said shipowners have recognised that reporting ESG measures is important. But on decarbonisation, for example, left open is the question of what that means and what their pathway is to a green transition.
Webber, whose New York research firm also focuses on the renewables sectors, said that on governance, the US-listed shipping companies have shown improvement in a space where related-party management structures have been an issue.
“That doesn’t mean that there aren’t actors out there that have conflicted structures,” he said.
“Some of those still exist. Some of them have improved. I think the market has largely priced out — or discounted access to capital for — truly conflicted structures. Although there are certainly examples of some entities that do have those conflicts.”
On carbon disclosures, while there has been improvement in the number of shipping companies that have been reporting data, providing a grade to their emissions remains difficult.
“Figuring out what a fair and reasonable basis, from which you can then start measuring, is a difficult starting point to get right to be accurate across so many different classes of vessels, and so many different types of shipping companies,” Webber said.
But for a measure of how shipping’s ESG performance stacks up compared with other industries, The Governance Group’s Nahem cited the small number of companies that have committed to the Science Based Targets initiative.
As of late January, just 11 marine transportation outfits have signed on to the initiative, in which companies commit to have their decarbonisation plans validated as in line with the goals of the Paris Agreement.
Meanwhile, companies are facing increasing scrutiny on human rights — a social factor.
“You need to know you need to demonstrate that, that you are aware of and taking action against potential human rights risks in your value chain,” Nahem said.
But he added that shipowners often point to the fact that their crew members are provided by third-party managers, and many may not be compliant with the growing rules.
He sees a lack of understanding that ESG goes beyond oversight. It is also about a company’s strategy, and that requires enhanced competency in the subject at the board of directors level.
“If you haven’t taken ESG in as a strategic dimension, you’re not really doing your job as a board,” he said. “You have a lot of boards with strong shipping competency, but you don’t really have boards with strong ESG competency.”
Refinitiv tracks ESG scores for hundreds of companies, including 44 in marine freight and logistics.
| Company | ESG score |
| NYK Line | 82.17 |
| Cosco Shipping Holdings | 82.08 |
| HMM | 73.1 |
| K Line | 67.5 |
| Mitsui OSK Line | 67.17 |
The Governance Group tracks ESG performance of Oslo-listed companies
| Company | Grade |
| Wallenius Wilhelmsen | B+ |
| BW LPG | B |
| Wilh Wilhelmsen Holding | B |
| Flex LNG | B |
| Stolt-Nielsen | B |
Webber Research tracks US-listed shipping companies and container lessors in its ESG scorecard.
| Company | Ranking |
| Genco Shipping & Trading | 1 |
| Euronav | 2 |
| International Seaways | 3 |
| Eagle Bulk Shipping | 4 |
| Ardmore Shipping | 5 |
This article has been amended since publication to reflect that Eagle Bulk Shipping is fourth-ranked on Webber Research & Advisory’s ESG Scorecard, while Ardmore Shipping is fifth.
