Shipping companies seeking to raise capital in Oslo have been forced to enhance their reporting on environmental, social and governance (ESG) matters in the face of more demanding regulators and financiers.
A growing number of companies with shares or bonds listed in the Norwegian market have presented more standardised, measurable data over the past few quarters, observers told TradeWinds.
“The quality of ESG reporting is across the board improving. Reporting is increasingly becoming standardised and based on quantifiable measures,” said Kristian Andersen, managing partner at advisory firm Governance Group.
Christos Tsakonas, global head of shipping at DNB Bank, agreed that “good progress” is being made in ESG reporting, “both quantitatively and qualitatively”.
The stronger reporting has come as investors have rushed to green and sustainability-linked bonds.
ESG bond sales on the Oslo Stock Exchange (OSE) reached a record NOK 36.7bn ($4.39bn) in 34 issues last year, compared with the 2019 level of NOK 11.1bn in 16 issues.
“Many investors are looking for companies aspiring to succeed in the low-carbon economy,” Andersen said. “The moment when maritime-related technologies or services qualify as green, there will be no lack of interest from ESG-labelled funds and investors.”
Norwegian laws, which track European Union regulations, have required all companies whose shares are listed on the Oslo Stock Exchange and Oslo Expand to disclose their sustainability principles and practices.
The Euronext Growth Oslo market, which targets small and medium-sized firms, does not have mandatory reporting requirements.
The Norwegian Shipowners’ Association (NSA) has published ESG disclosure guidelines in accordance with the Global Reporting Initiative, the Sustainability Accounting Standards Board and advice from Euronext, which owns the three Oslo markets.
TradeWinds looked at 27 vessel operators, lessors, managers and builders listed in Oslo and found most of them have begun to report emissions-related figures.
Frontline, Avance Gas, Flex LNG and Golden Ocean, the four John Fredriksen-controlled firms, are using a similar format developed from the NSA guidelines.
In contrast, each of the BW Group firms listed in Oslo has its own approach. While BW LPG has launched a website to disclose its ESG-related activities, Hafnia and BW Epic Kosan reported environmental metrics in their periodic reports. BW Offshore issues a stand-alone annual sustainability report.
With EU and International Maritime Organization decarbonisation regulations coming into force, most companies are willing to share top-level emissions data.
But a much smaller number of firms report detailed figures on their energy efficiency. Moreover, shipping companies have generally disclosed a lot more on their environmental performances than on social and governance matters.
Tsakonas suggested companies should also disclose their diversity, crew welfare, scrapping and anti-corruption practices.
Geir Atle Lerkerod and Thor-Erik Bech, the two shipping chiefs at Nordic bank Nordea, suggested that companies incorporate sustainability criteria into their strategy, governance, risk assessment and operations.
Moreover, “some companies are doing great things within sustainability, but they have not focused on communicating their ESG profile”, they told TradeWinds.
Andersen also observed shortfalls in shipping’s ESG reporting.
“The rationale for ESG priorities is often not explained, and not linked to the business strategy,” he said. “Additionally, about one in three companies in the maritime sector has little to no information on how climate-related risks are being managed or monitored.
“The low-emission technology requirements and carbon taxes will likely have tremendous financial impact … Many companies currently lack the information to reassure investors that they do have a credible and future-proof business strategy.”
Although a company does not necessarily need to report on ESG matters to secure financing in Oslo, banks and investors have been increasingly demanding more transparency on sustainability-linked performances.
In particular, pension funds and life insurers care more about how their investment targets perform, according to Lerkerod and Bech.
DNB would assess a client’s ESG standards when determining its capital allocation because sustainability is “tightly linked with future competitiveness and inherent credit risk”, Tsakonas said.
“We are in close cooperation with clients on these topics, whether they report publicly on it or not.”
