Hermanrud told the Marine Money Forum in New York that the move towards ESG, a key component on the virtue side, was “the biggest change” that he’s seen since the dot.com bubble 20 years back.
His views were echoed in a keynote presentation by Clarksons Platous’s head of US Securities Omar Nokta, who noted that, “Regulations on CO2 emissions would have a material impact” on the shipping markets, and be likely “to keep newbuilding orders in check”. Besides the carbon “gamechanger”, he also invoked more traditional metrics, citing cargo demand that has been growing faster than fleet supply in recent years, 3.2% growth versus 2.9%.
Following his introductory remarks, Nokta hosted a fireside chat with two investment professionals, Vance Brown- Portfolio Manager with William Jones Wealth Management, a private money manager, and J Mintzmyer, of Value Investors Edge – an analyst advising family office on maritime investors. Mr. Brown stressed the present shipowner cautions regarding propulsion choices, and a belief that these uncertainties would keep the order book lower than it might otherwise be. Mintzmyer offered the session’s marquee quote- saying “If China is stable, the market will be on fire.”
Both panelists, in looking towards the longer-term view, brought up a theme not frequently heard- the idea of a “bifurcated market”, or a two-tier market, where, in the words of Vance Brown, “the inefficiencies of older ships will become more apparent.”
ESG is now the rage, explicit or implicit mentions permeated the day-long conference. On a shipowner panel, Ted Young, cfo of Dorian LPG, explained: “We’ve consistently had a good commitment on environmental matters; now…it’s about letting the world know.”
International Seaways’ cfo Jeff Pribor said, “it’s about codifying what we are doing”. Ridgebury Tankers’ ceo Bob Burke explained that his company’s private equity fund providers are being asked, by their investors, about ESG characteristics of portfolio companies.
But, there is a spoiler alert- the same way that the dotcoms crashed, Sparebank’s Hermanrud suggested that maybe all the money going into ESG investments could resemble a lemming-like move towards the edge of a cliff. Further, if oil production is reduced, energy shares (a poor performer in the past decade) could see better relative performance, even in the face of fossil fuel demand leveling off.