All Eyes on Supply Chains- as Financial Regulators Get an In-House Climate Czar

I read recently, in a blast from one of the law firms, that the U.S. financial regulators are exploring the ideas of adding explicit metrics related to Environment, Social and Governance (ESG) to required financial disclosures. As I’ve long maintained, shipping’s response to social pressure comes through their linkages (often indirect or obfuscated through lengthy supply chains or manufacturing chains) with charterers, cargo owners, whatever we call them, who are linked to broader societal trends. In a few cases, where passenger ships are involved, the linkages are direct in nature. The Securities and Exchange Commission (the “SEC”) mandating such disclosures (yes, legal eagle readers, this is hardly a done deal- actual mandates are hardly right around the corner) is far more powerful than my intonations that bad actors be called out on social media, or by data boffins who could link up AIS, vessel ownership documents and cargo manifests. So who knew?

We’ll get to the “E” part a little later, but the “S” in ESG applies in a very big way; yes “social” and “seafarer” both start with “S”. That’s important – and, rightfully, seafarer issues have received a fresh wave of attention lately; there are still mariners “stuck” aboard vessels, caught amidst failures to navigate a whole set of “gotchas”- complicated rules and bureaucratic snafus so they can get home. Several weeks ago on these pages, I lamented the huge queue of vessels- many having loaded coal cargoes in Newcastle and ports up and down New South Wales and Queensland, tied up at an anchorage limbo off the coast of China- which is not taking imports from Australia. At least one owner with an oversized public profile, MSC (best known as an owner of containerships hauling boxes for major consumer-facing brands, and also- cruise vessels, touching consumers up close and personally), is also involved in bulk shipping through a ship management arm. I vaguely knew this, but now it’s top of mind, because an MSC- managed bulk carrier was diverted to Japan, where it was possible to implement a crew change after months of sitting at an anchorage. According to MSC, they had tried, unsuccessfully, to work out a fix through diplomatic channels but finally took the re-routing step. The public persona that I mentioned is important; not every vessel owning entity has such a direct exposures. Kudos to MSC- maybe others (even if lacking an in-house “media” outreach capability) might follow their example.

For the folks with cargo, that “E” is a big deal; it’s more obvious than the “S”. If disclosures are required, then the carbon footprint of carriers moving their merch would come to the fore. Thus, the “E” part of ESG continues, Maersk (by the way, where MSC’s top container man had previously worked), with an aim to be totally carbon free, announced an important big step. A 2,000 TEU vessel in the process of being ordered, delivery from an unspecified yard expected in 2023- would be fueled on methanol (actually dual fueled, along with very low sulfur fuel oil, or VLSFO). Maersk has longer term plans for using methanol to power its vessels- in conjunction with its ambitions to develop supply chains for the fuel (and new versions of it created completely synthetically, and from bio-waste). Wallenius Wilhelmsen, another listed entity, has looked at the “E” from a different angle- wind power. The power comes not from wind turbines (nautical equivalents of the kit that allegedly froze up in Texas), but, rather devices akin to sails aboard the vessels. No worry about interference with cargo operations- the WW ships are mainly floating garages, so it’s all good. Much of its four wheeled cargo bears the logo of well-known consumer brands.

Now that the U.S. SEC has its own internal “Climate Czar” (sort of, the title is actually Senior Policy Adviser- for climate and other ESG issues), more eyes will be turning towards shipping and the supply chains fashioned with seaborne linkages. First will come “climate”- related “E” things, but the “S” will not be far behind.