How fast-moving and deep-rooted are the changes to business practices apparently sweeping across the maritime sector today? And what are the implications for individual shipowners, operators and charterers as we head into this brave new decarbonised world? As Morrissey sang all those years ago: “Has the world changed, or have I changed?”
There is a widely-accepted view that society’s rapidly changing priorities — most notably in the response to the climate crisis — are accelerating the shift towards greater transparency, corporate responsibility and better governance.
But what hard evidence is there that this is a reality for the great majority of shipping companies? Is it anything more than a comfortable narrative talked up by mainstream corporates to burnish their public credentials in front of financiers and regulators?
The answers to such questions are important since the reality rather than the myth will reveal how effectively the entire shipping sector will adapt in this era of dramatic technological upheaval and rapidly changing social expectations.
Consequently, it was fascinating to hear this week of the results of an attempt by international law firm Watson Farley & Williams (WFW) to take the temperature of the market with an in-depth survey of the impact of environmental, social and governance (ESG) issues on shipowners, financiers and charterers.
The survey has been long in the making through this year of Covid-19 and lockdowns. WFW’s global maritime sector co-heads Lindsey Keeble and George Paleokrassas kicked off the idea early in 2020 after reflecting on the way the industry’s mood music had changed in the previous 24 months.
Moves by the International Maritime Organization to implement meaningful carbon reduction targets, alongside rapidly hardening investor expectations of competent corporate governance, had been apparently changing the landscape. But they wanted to probe how deep and how far the changes had spread in practice and attitudes.
Underbelly remains
WFW hired Euromoney’s Thought Leadership Consulting's Ben Bschor and Alex Derber to help conduct the survey, alongside contributions from 10 senior industry figures from shipowners, operators, charterers, financiers and risk managers.
The results both affirmed the consensus view that change is here, and here to stay, but also revealed — perhaps unsurprisingly — that there remains an underbelly of those who either refuse to acknowledge the world is changing or, regardless of that, that they will not have to.
Almost a third of shipowners say that ESG criteria barely influence their investment decisions, whereas nearly 90% of financiers regard ESG as having some or even crucial importance
WFW survey
Some 545 senior executives were surveyed, of which about 240 — or 44% — were shipowners or operators, with a similar number of financiers, and 65 charterers, or 12% of the total. These numbers mean the results are well on the way to statistical relevance.
Perhaps one of the most interesting overall findings was the areas where the views of financiers and investors diverged from shipowners and operators. As Paleokrassas said, there was a greater alignment between the two tribes on the "E" part of ESG, but a clear distinction on the "S" and "G".
Most in the industry, regardless of their responsibilities, agreed that reducing carbon emissions was the greatest challenge facing the industry. But there was a big divide on the relative importance placed on sustainability by operators and financiers.
“Almost a third of shipowners say that ESG criteria barely influence their investment decisions, whereas nearly 90% of financiers regard ESG as having some or even crucial importance,” the survey noted.
And while traditional ship-finance banks have widely made a commitment to sustainability, the survey found they seem to have a limited appetite to fund new technologies themselves, or accommodate finance by others on ships financed by them.
Access to capital
Among the owners and operators polled, 61% said they were not looking at changes to their corporate structure in the light of governance pressures, and more than one-quarter would not change their capital structure to meet ESG finance conditions.
Paul Taylor, global head of shipping and offshore at Societe Generale, who was among the expert contributors, commented bluntly: “The more traditional shipowners that wish to stay more opaque — they will find access to capital very difficult going forward.”
However, WFW’s Keeble said she was not surprised by the overall results, which showed most owners and operators were engaged with the broader social and business changes. This proportion was also clearly on the rise, especially when taken with the appetite for joint ventures and other collaborative projects to address environmental problems.
You would not have seen such numbers five years ago, and she said you can equally be sure there will be many more in five years’ time. Evidence, perhaps, that the world really is changing.
