A seven-year horizon is well into the future and allows time to develop new relevant technologies to have a future sustainable shipping business. As we are in the midst of extremely uncertain times from both a geopolitical and environmental perspective, a “buy to hold” investment with a 2030 horizon requires a deep dive into the target company’s business model.
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?
My selection will include those organisations with a committed investment profile within research and development (R&D) or with established or planned collaboration channels with other companies in the R&D space.
To mention some R&D areas of relevance: the need to achieve carbon-efficient vessels and hull design, readiness for fuel efficiency, operational efficiency with digitalised systems for weather routing, sailing patterns and speed optimisation. This ongoing investment will apply irrespective of the segment in which the company operates.
Those with strong management who are constantly on their toes with an intent to be ahead of the curve on technological development to accelerate their emission readiness, while at the same time taking diversity, equity, and inclusion seriously, are the ones to follow.
Will early movers be the financial winners?
Maybe not in the short term but, in the medium term, yes, despite the higher risk of being the front-runner. The “S” of environmental, social and corporate governance — if defined broadly to include society — points to the growing importance of long-term sustainability and profitability, whereby companies will increasingly need to take a proactive approach in the way they define their role in society. The war for talent, the fight for capital, and reputation — they all start here. Any sustainable business model will incorporate the company’s role in society as a core element.
Main segments for my portfolio include wind service, gas — in particular, those with carbon capture and storage incorporated in their business model — and container shipping. All segments would have an infrastructure and value chain perspective more than a pure asset perspective.
In short, I would look closely into the companies with the above qualities for my shipping fund.
As to the question of one policy or regulation requirement to wish for, it would be for the IMO to get approval for its proposed revised 2023 strategy with their altered targets for 2030 and added targets for 2040, as well as the introduction of a needed carbon-pricing element.