Several major shipbrokers have entered the environmental brokerage business amid expectations of a spike in demand for carbon credits.
BRS, Clarksons and Affinity (Shipping) launched their carbon desks in late 2020 and are among the first in shipping to enter the ever-evolving market.
The European Union is drafting regulations that will likely require vessel operators to buy emission allowances for their voyages to, from or between European ports, which could take effect as early as 2022.
“We're setting up the whole structure,” said BRS partner Alexander Hochreutener, who plans to build a team of three in Europe initially.
Opportunities
“There is going to be some interesting opportunities for us and also to coexist with the normal brokering we do.”
Aside from brokering voluntary credits and European Union Allowances (EUAs) for the new emissions regime, the French shipbroker’s environmental team is seeking to offer advice on carbon offset projects.
Backed by data from BRS affiliate AXSMarine, it is also developing digital tools that can calculate shipping emissions.
“Being one of the first to offer these solutions allows us to not only add to our already existing sustainability solutions, but to assist and navigate our clients through what is a new and complex topic,” Hochreutener told TradeWinds.
Clarksons intends to offer carbon-related services via its derivatives unit, according to people with knowledge of the matter.
Last December, Duncan Lyall joined Clarksons Platou Futures as head of carbon broking in Singapore from StoneX.
Shipbroking giant’s ambition
With experience as an environmental broker at GFI Group, the industry veteran is expected to help Clarksons tap into demand from commodities majors and oversee emerging carbon markets such as China.
He will coordinate with Clarksons Platou Futures’ London team, which has proximity to the European market.
TradeWinds understands the shipbroking group will seek to take advantage of its expertise in investment banking and research for green shipping in this new field.
“Clarksons want to be front and centre. It wants to be engaged [with emerging demand],” one source said.
Affinity has established a specialist team that help its clients calculate their environmental footprint and trade carbon credits from London and Singapore.
Headed by former environmental analyst Hugo Wilson, the carbon solutions team completed its first transaction recently.
“I'm very excited about it,” Affinity managing partner Richard Fulford-Smith said. “We are looking at how we provide solutions to an industry, which is extremely reluctant to acknowledge any form of change.”
Some companies — including Total – have begun to acquire voluntary carbon credits to offset emissions from their shipping operations in attempts to meet corporate environmental targets.
The developments have prompted major brokers with derivatives operations to explore carbon trading.
“We are keen to talk to talented carbon derivatives brokers who can be part of our team,” Simpson Spence Young told TradeWinds.
Tris Simmonds, who is in charge of Braemar ACM’s derivatives unit, said his company would “definitely” look to provide carbon broking in the future.
Online platforms
Initially, Braemar is expected to help vessel owners and charterers obtain offsets on a project basis, deeming such purchases one of the ways to reduce vessel emissions.
The carbon markets have faced no shortage of brokers since they emerged in the 2000s, and the most active players have also tended to handle other financial instruments.
In addition, online platforms for carbon trading have become more popular.
Navigator Holdings, which claimed to ship the first carbon-neutral LPG cargo last month, acquired emission offsets via Norwegian platform CHOOOSE rather than a broker.
The shipowner is now studying whether it would be commercially viable to offer emission-free shipping services, chief commercial officer Oeyvind Lindeman said.
“Many of our customers would be quite motivated to look into that because they have their own CSR [corporate social responsibility] targets,” he predicted.
Fierce competition
Other than fierce commercial competition, shipbrokers have regulatory hurdles to cross when entering the carbon business.
Although the voluntary market is little regulated, handling EUAs in spot trade often requires a separate licence from European regulators.
Despite the challenges, Hochreutener reckons brokerages with maritime backgrounds can have a bright future in carbon trading because of their industry knowledge and client bases.
“Shipping is very much relationship-based. We have the relationships in place, we can talk the language and we have an understanding of all the concepts,” he said.
