I do not normally celebrate when I hear someone had a gun to their head, but it was good to hear bankers use that phrase in regard to environmental issues.
Shreyas Chipalkatty, global head of shipping and logistics at Citigroup, told a Marine Money Week conference that the old banking rules were null and void for him.
“We have a gun to our head right now in terms of the lending imperative,” he explained with reference to the Poseidon Principles that demand decarbonisation be a key part of any borrowings.
There is now pressure to go further on Poseidon — not retreat — said Paul Taylor, head of shipping at Societe Generale, at the same conference. The Principles need to be fully aligned to the Paris Agreement on climate change, people are now arguing, he explained.
Societe Generale and Citi were among the founding fathers of Poseidon along with DNB, plus shipowners such as AP Moller-Maersk and Euronav.
The principles were regarded as a bit barmy and do-goody when they were being drawn up three years ago but as Chipalkatty said, they are imperative now.
Opportunity knocks
Why? Because the wider financial world is waking up to the public pressure around the climate crisis that ultimately threatens everyone’s businesses — and lives.
This awakening is also a business opportunity. It has triggered a huge rush into clean tech at such a pace that the money is overflowing around some quoted stocks.
The Financial Times reported that the combined assets of the US-based iShares Global Clean Energy ETF (exchange traded fund) and its European equivalent, INRG, have seen their combined value surge from $760m to $10.8bn over the past 18 months.
The S&P Global Clean Index of 30 leading stocks such as Danish wind turbine maker Vestas and Danish wind farm developer Orsted is now desperately looking at creating new indices covering alternative fuels, marine energy and smart grids to cope with the gold — or rather green — rush.
The opportunities for shipping companies that can prove real progress on the environmental front are obvious.
But it is also true that ship financing from the top 20 banks has shrunk — by up to $250bn over the past decade if you believe experts at Standard Chartered bank. Asian leasing companies have only taken up a small amount of the slack, leaving fears that smaller shipowners in particular will find it hard to get finance.
And, as Svein Steimler, the boss of NYK Group's European arm, has pointed out, a lot of those smaller owners do not have the physical capacity to really look into clean-tech developments for their own needs.
Investor pressure
Meanwhile, Bergen-based Odfjell told a recent TradeWinds webinar that the sustainability-linked bond the Norwegian company sold earlier this year had attracted investors who normally steered clear of shipping.
Bulker giant Golden Ocean spelled the wider message out to the same shipowners' forum, as my colleague Holly Birkett reported.
“Underestimate decarbonisation at your peril,” chief executive Ulrik Andersen said. “I think if you want to attract talent in the future you have to have a strategy. We’ve talked about the investors and, of course, ultimately all of this will impact the asset prices and thereby our share price, so it’s all related.”
Indeed it is. And the pressure will grow as investor organisations such as the Carbon Disclosure Project gather steam ahead of the COP 26 round of intergovernmental climate talks in Glasgow in November.
The project has been roughing up high-profile companies such as Berkshire Hathaway, Amazon and even clean-tech car group Tesla over their failure to report data on climate change adequately to their shareholders.
Shipping remains largely under that radar due to the small size and private status of most companies, but the wider pressure is building.
The US Securities and Exchange Commission is discussing whether to impose formal requirements on environmental, social and governance criteria on stock-listed US companies.
The atmosphere around climate action in North America — and the rest of the world — has changed substantially since the arrival of President Biden in the White House.
Attention switches to the European Union over the next month ahead of the expected announcement about an emissions trading scheme to cut carbon pollution from shipping.
That will be the next round of gunfire.
