All eyes are on ESG at this point, including those in Washington, D.C. where securities regulators are said to be taking a closer look at how companies might disclose their ESG posture- yes, score-keeping on a grand scale. There is a great deal of emphasis on the “E”- all things environmental, as matters relating to Climate Change are of great importance to the Biden administration. As the maritime industry struggles with the panoply of measurements (all with abbreviations and formulae to back them up), and with uncertainties of who might enforce them- exactly, listed companies might then face further templates for disclosures. As the carbon intensity (or not) of vessel charters or cargo bookings by large listed corporates (oilco’s, big steelmakers, raw materials producers) starts to inch towards the public domain, I am seeing multiple layers of complexity ahead. By the way, some of the reporting from Washington, D.C. intimates that the Securities and Exchange Commission is thinking about how it might cast its net around the ESG activities of private entities (presumably held in the investment portfolios of SEC-regulated entities). I recently saw at least one Class Society announcing a software package that could report out the various indicators and levels- these types of platforms will be commonplace. As I wrote a few months back, the boffins will be having a field day. Send some number crunching my way, please!
Shipping names are taking vastly different approaches to climbing aboard the ESG wave. Late last year- we saw one extreme example of a drybulk company dumping its whole fleet (did I hear someone say “fire sale”?) and switching into expensive heavylifters for hoisting turbines (never, never, never call them windmills) offshore. The past week or two offered some good examples of the different approaches in play. The first is a very likely template for what we might see going forward. One large listed tanker company announced that it would be ordering three VLCC’s that could be fueled on LNG- a fuel that does not eliminate carbon emissions but would certainly lower levels compared to existing vessels (even Eco ships) going out to perhaps the early 2040s. The detailed boffin calculations don’t make it into the Press Releases (too bad, and that’s a topic for some other day) but, at a high level, efficiency of the engines improves (and presumably carbon intensity, which will affect their loan pricing if they go with bank finance, also is reduced). If the SEC really and truly goes to town, equities making such moves will be looked upon favorably by funds and institutions that fall under the agency’s regulatory scrutiny. A lengthy charter with a top tier oil major will support whatever financing alternative is chosen once the vessels deliver two years hence. For the oil major, with all manner of E-snoops looking over their shoulders, they’ve chosen a tonnage alternative that raises their scores. Indirectly, they are supporting an investment on the road to decarbonization. Good all the way around.
The second one is a little more interesting. A few columns ago, I said that I would write about LNG but not other fuels because they are not yet ready for prime time. But I have to backtrack on that now, because one listed owner in the products and chemical tankers segment is going into the hydrogen business. Interestingly, it’s not so much about fuel cells for its vessels, but rather into the infrastructure side- that is, the production and delivery of hydrogen in small increments- that could then inhabit fuel cells. The hydrogen is transported through the medium of methanol- which, by the way is moved on product tankers (and, parenthetically, is sometimes used to fuel ships). Hydrogen fuel cells are not yet ready for maritime prime time on long voyages, but may be getting there rapidly. Importantly, a component of this deal involves inland waterways with short hops and generous port times- where massive amounts of hydrogen could not be delivered, but fuel cells could more readily be deployed. This is an atypical deal, but one where a listed shipping company will score ESG points- big time.
