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Green Investment

11/16/2020

That’s the way it is in life- you get a position or a map but not both at the same time.”
William Least Heat Moon

Maritime vessel owners and operators are being pressured by international authorities and port state regulations to comply with regulations forcing vessel operations to be “clean”. That is, sea transport producing greatly reduced greenhouse gas emissions, reduced spread of invasive bio species through ballast water treatment and clean hulls, and reduction of overboard wastes.

All of this costs money, starting with the large capital outlays for the design, testing and building of ships of entirely new designs. In the long run over the life of a ship, much of this will be recovered by reduced annual operating and maintenance costs.

Meanwhile…Along comes ESG, Environmental, Social, and Governance compliance. In the past corporations followed CSR, Corporate Social Responsibility. Make a profit but along the way be good to your employees, customers, community and the environment. While CSR sounds wonderful, ESG now has corporations having to produce the metrics that show that they are actually working toward the CSR goals and making a difference.

In the environmental area this might be showing a reduction in carbon emissions, kilowatts of energy saved, reduction in tons of waste, reduction in water usage, and progressive targets for each year. This can be done with the older standards like ISO 9001 and the newer ISO 14001-Environmental Management System (EMS), and ISO 50001-Energy Management.

What does this have to do with the marine industry? Shipping has many similar regulations that have been put in place by the International Maritime Organization (IMO) forcing the “greening” of the industry. And ESG is used as a key assessment marker for investors.

It is reported that as of early 2019 a quarter of the world’s professionally managed investment funds only invest in companies that have sound ESG credentials.

A recent article in the New Orleans newspaper noted that Nationwide Insurance just invested in a Louisiana 50 megawatt 197,000 solar panel solar farm as part of its ESG stance. This electricity will be sold to a Fortune 500 Entergy Corporation who now has around 190 megawatts of renewable energy in its portfolio including waste heat recovery, biomass, and hydro power. Entergy states that in the past two years about 25% of the electricity used in Louisiana came from carbon free sources.  This is in a major oil producing state and follows up on my data on the drop in coal usage.

So, it can be many of the usual lenders that will find it in their interest and part of their new mission statement to fund new marine construction and conversions in the next decade. Working with owners and shipyards green loans can be made as part of the portfolio of loans to a company along with normal funding.

KEEPING SCORE

It is agreed that it is good to be green and many throw their “greenness” in front of lenders, investors and the public. But the truth is that there are no agreed to bases for measuring green.

Various sides push LNG, low sulfur fuel oil, ammonia, bio-fuels, hydrogen, methane, lithium power packs, etc., but like good sales people they accentuate the positive and eliminate the negative.

What are “zero emissions”?  All airborne emissions? Is that just the current headliner CO2, or does that also include the collection of Green House Gas (GHG) and/or lead? Is it just air emissions or also emission into the water through hull biofouling or the exhaust from open circuit exhaust gas scrubbers? And how about the emissions on shore from the production of these fuels or battery packs and the coal or LNG power plants that charge the batteries.

But there are interested and powerful parties that are working toward developing “score cards” that will measure the ecological soundness and advantages of environmentally sound designs and practices.

The Green Shipping Project is sponsoring the Sustainable Shipping Initiative (SSI) which will define criteria for new fuel’s sustainability. They will then work with other bodies to create a form of certification.

The main bodies interested are of course the IMO which has been working on emission standards for several decades, and probably classification societies and port state authorities that will be signing off on certifications.

Another step is the recently announced rating system put forward by the International Chamber of Shipping (ICS) where every vessel under IMO regulations for emissions (greater than 5000 G.T. will receive and operational efficiency rating, much like a report card. They will each have a grade, possibly A to E, or A to G, which can be updated annually. This grade will be included in each vessels IMO specifications so that anyone, be it shipper, charterer, or prospective buyer, knows where the ship stands in efficiency.

This system has been presented to the IMO to be made into a regulation. One might expect that when ratified, vessel operators with vessels under 5000 G.T. might seek credentials as part of green marketing.

DLS Marine will be watching this and the many other design and regulatory factors that may be affecting vessel values in 2021 and forward. As if the economy in 2021 and forward is not enough to research and consider in our valuations.

Norman Laskay
nlaskay@DLSmarine.com