Green shipping and other social and corporate governance issues are key questions for all shipowners at the start of this new decade, but the real world of trade and shipping means a big and potentially lucrative deal pipeline will remain for years ahead.

That is the view of ship finance advisor and arranger RMK Maritime, which has beefed up its Ascension Finance arm to offer private equity-backed mortgages to small and medium-sized owners.

“Environmental, social and governance issues are very high on everyone’s radar screens. You have to be thinking about it, no doubt about it,” said Michael T Kirk, one of RMK’s two founders.

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Potential conflict

But because of the long life of shipping assets and today’s scarcity of capital to finance ships, the market will remain broadly in its current shape “for the foreseeable future”, he added.

Co-founder Richard Moore said shipping faces a huge challenge managing the shift to low-carbon fuel while maintaining services.

“It’s that classic case of that we’ve all got a responsibility to be green and ethical, but it does conflict with the classic business model. We’ve all got a responsibility to make that work in the best and most efficient way,” Moore said.

“It’s going to create a bit of a dichotomy for investors,” Kirk said. “People will say, ‘I don’t want to invest in this type of business’,” because of the carbon impact or carrying fossil fuels.

Earnings power

“But at the same time, that business isn’t going away. That 10-year-old cape and 10-year-old VLCC are not going to go away, so there is going to be a really interesting space for people to maybe make an outsize return.

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“And that’s one of the things we’re really focused on, and with Ascension that’s why we like the mid-aged assets.

“We think there is real earnings power there and will continue to be.”

Moore added: “For mid-aged ships there’s a massive capital difference between the resale price [compared with newbuilds] but the earnings potential is pretty similar. So your cash-on-cash returns are really good at the moment.”