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ESG - moving into a more transparent future

During the past year, the ESG (Environment, Social, and Governance) theme has been rapidly infused into the maritime investment space.

Marine Money’s multi-part virtual Ship Finance Week, spanning Singapore and New York, took a big picture look at the landscape with a session on “ESG Investing & Shipping: A Roadmap for the Future”- organised in conjunction with DNB Markets.

 Keynote speaker Erika Karp, the founder and ceo, of New York investment advisor Cornerstone Capital Inc. said that “ESG investing is the next discipline of finance; there is no such thing as an ESG asset class or investment style.” She suggested that “the pace of innovation is speeding up” against a backdrop of technology trends that are accelerating exponentially.

She included climate change and food systems among a list of items becoming increasingly important to investors, at a time that “the business of investing is changing, for the good” with investors demanding more transparency.

In this wide-ranging session, important insights relevant to maritime transactions came from Nina Ahlstrand, Head of Sustainable Finance, DNB Markets. In her remarks, she highlighted the late 2019 Teekay Shuttle Tanker $125m “Green Bond” transaction, stressing importance of the “Light Green” rating accorded by Cicero, a third-party provider of green certifications.

“To reach the [CO2 reduction targets] of the Paris Agreement, we cannot invest only in assets that are already Paris-aligned, we need to also invest in the transition- into assets that are more Paris-aligned tomorrow than today.” She said that the “Light Green” label represents a significant emission reduction in the short-term, and “…not necessarily the long-term solution.”  With the new shuttle vessels replacing older units, she stressed the importance of not adding additional capacity to the fleet.

In talking about transactions generally, she mentioned that Nordic investors, with Swedish firms predominating, have been very active in ESG investing, saying that these investors “have been very vocal in integrating ESG into their strategies and mandates” for putting their capital to work, adding that: “Their expectations have definitely increased” and that investors want to see clear ESG strategies and targets in the companies they invest in.

Panelist Joachim Nahem, founding partner, of The Governance Group- based in Oslo, which produces an “ESG 100” listing, said that firms need to focus on ESA opportunities (in addition to the many risks). Nahem mentioned that his firm was considering expanding its listing to include shipping companies. Stressing the need for transparency, he said “…we are looking to see if we find this <ESG> information for shipping companies…”

The “G” part does not always get equal attention. Worth mentioning, though not included in the Marine Money webinar, are the efforts of Michael Webber, who founded Webber Research & Advisory after many years as a transport analyst at Wells Fargo Securities. Early on, MWebber developed on ESG scorecard which included shipping companies, which is now being broadened into the “S” category, as company filings include data on CO2.  

Also noteworthy are the efforts of the oil industry analyst team at Evercore ISI- led by James West, who have intoned oil producers to take “The Pledge”- an intonation for listed companies to improve profit margins (rather than aim for the largest output) and tie management compensation to financial performance. Both of these, and with Nahem’s “ESG 100” are examples of implementing the “ESG system” that was described by keynote speaker, Karp.

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