Shipping is a sector defined as hard to abate, but one fully aware of the need for decarbonisation.
This article is part of a series written by people across shipping in response to this question about how to deploy a hypothetical TradeWinds Sustainable Shipping Fund:
How, where and why would you invest $1bn for the best return in sustainable shipping, as the industry grapples with the need to cut carbon emissions, improve efficiency and keep cargoes moving in a world facing multiple economic and political challenges? The investment will be made now and ideally held for the next seven years to the end of the decade. As an added bonus, give one policy or regulation you would like to implement from 1 January 2023 to benefit shipping?
Over the past decade, more than $46bn has been invested to reduce the CO2 impact, moving the sector’s emissions from 3.2% to the current 2.4%.
This investment has been fully funded by private resources without any public grants.
I believe “there is no transition without combination”. This is my motto.
Shipping business models are similar to those of infrastructure and we cannot expect our assets to suddenly be stranded.
This is also the sense of the EU Taxonomy, which has awarded shipping the status of a ‘Transitional Sector’ under Article 10.2.
Our strategy will only be successful if we are able to combine old, retrofitted vessels with new ones enabled by available technologies.
Moreover, I consider it strategic to invest in the infrastructure facilities and logistics chain that can ensure a smoother and greener change and more efficient asset allocation.
Epochal change
Seven years is not enough time to get the best returns in an epochal technological change. But it can be considered a good time to recover the best investment options going forward.
How would I invest my $1bn to get the best return in seven years?
- 20% in the tramp sector (medium-size bulkers and tankers): secondhand vessels with eco-engines.
- 30% in the tramp sector (medium-size bulkers and tankers): newbuildings with alternative fuels (methanol, renewable fuels of non-biological origin).
- 20% in shortsea and coastal trade ships (small/flexi chemicals and LPG ships) and alternative fuels (methanol, renewable fuels of non-biological origin).
- 30% in storage and logistic facilities related to alternative fuels and LNG (including smaller bunker vessels).
In my institutional role as chairman of the ship-finance working group at the European Community Shipowners’ Associations and Italian shipowners’ association Confitarma, I am working and hoping for harmonisation of several overlapping regulations — such as FuelEU, the EU emissions trading system and EU Taxonomy — at different levels.
We need a homogenous and unique pattern that avoids the risk of market distortions; the line between “green” and “greenwashing” is narrow and time is crucial.
