30 September 2021
With the Zero and Low-emission Innovation Forum – co-hosted by the IMO and UNEP – having been held this week, the transformation of the maritime transportation sector is taking centre stage this autumn. The blue (ocean) economy offers many opportunities for private finance to lend and invest in a sustainable and nature-positive way. Here we look at some of the leading examples of best practice in social and environmental sustainability across the maritime transportation sector which banks, insurers and investors can seek out.
Maritime transportation comprises the vessels and infrastructure that drive global trade, offshore and naval operations and passenger transport across the global ocean. Financing this sector and its transition to sustainability is therefore a complex but crucial exercise.
The environmental impacts of shipping range from air and water pollution to harming marine life and climate change. Environmental impacts by maritime transportation operations include warming and acidification from emissions, habitat loss from vessel routes and dredging, biodiversity loss from emissions, oil spills, and collisions with marine life. A combination of regulation, renewable energy advances and customer demand has created an opportunity to make shipping more environmentally sustainable.
To add depth to our efforts to build a sustainable blue economy, we have listed 4 examples of innovative best practice in coastal and marine tourism for your inspiration.
Check out Turning the Tide, UNEP FI’s detailed guidance on financing for the sustainable blue economy for more examples and how they may be material to your institution. The guide also includes an overview of activities to challenge or to avoid financing altogether, based on their sustainability credentials and overall risk. The recommendation may be to challenge certain activities, even where best practice is present in other areas.
1. Technology innovation
Maritime transportation is ripe for innovation – particularly by leveraging new technologies, such as autonomous shipping which can provide greater environmental benefits through efficiency and reduced emissions. Financial institutions may support or consider autonomous shipping and other technologies for safety and environmental benefits.
Recent years have seen the development of a number of innovative approaches to sail-based maritime transportation. Among these is Neoline, a French transport company established in 2015, which has established a project for the development of a new roll/on-roll/off (RoRo) shipping line on the North Atlantic route between St Nazaire in France and Baltimore (USA), with stopovers in Halifax (Canada) and St Pierre & Miquelon. The project is based on the operation of two innovative sail-based RoRo vessels, using 4100m2 sails as the main propulsion system, reducing carbon emissions on this route by up to 80%. The vessels will be constructed at a shipyard in Turkey and operated in compliance with IMO and EU regulations and will operate under an EU flag.
Planning for the end of a vessel’s natural lifespan allows for a reduction in waste as well as potentially harmful decommissioning practices. Seek out companies that build or retrofit vessels with end-life cycle in mind or explore leasing of new green technology.
3. Supply chains
How shipping companies source products and manage their supply chains can have a significant impact on their footprints. However, opportunities are emerging for more sustainable supply chain management, for example through partnership with others including logistic and service providers. Seek out companies employing Green Supply Chain Management (GSCM).
The shipping sector has additional opportunities to get involved with global decarbonisation efforts, particularly through financing greener technology as the requirements for the shipping sector to decarbonise materialise. Seek out companies that participate in policy and finance initiatives to fund green shipping technologies, including carbon pricing.
As an example, Maersk announced in 2018 its commitment to becoming carbon neutral by 2050 (Financial Times 2018). In 2020 the company secured a USD 5bn revolving credit facility with a syndicate of 26 banks committed to green investments (Seatrade Maritime News 2020). The credit margin under the facility will be adjusted based on Maersk’s progress to meet its target of reducing CO2 emissions per cargo moved by 60% by 2030, which is more ambitious than the IMO target of 40% by 2030 (ibid). This new finance facility affirms the company’s efforts to drive sustainability into its operations and supply chains.
The new finance facility was substantially oversubscribed, reinforcing the opportunity for financiers to lead shipping’s transition to sustainability (Marine Money 2020). Based on Maersk’s experience with the credit facility, rewarding shipowners with financing terms for outperforming IMO 2030 emissions reduction targets is a promising mechanism to drive sustainability progress in the industry and create new opportunities for green investments.
DISCLAIMER: this list does not represent investment advice nor is it an endorsement of any specific investment opportunities. Due diligence should continue to apply in addition to consideration of opportunities enabled by applying the Turning the Tide guidance.