Climate transition pathways could pose risks to the banks that hold USD 400 billion of global shipping debt, according to a research conducted by Carbon War Room (CWR) and University Maritime Advisory Service (UMAS).
With the onset of climate policies as soon as 2023, a need for significant capital investment to keep vessels competitive is set to arise.
The Navigating Decarbonisation policy, an approach to evaluate shipping’s risks and opportunities associated with climate change mitigation, lays out the first approach to climate stress-testing of shipping assets and proposes that enhanced due-diligence undertaken today by financiers, shipowners, and shareholders “can help deliver long-term value and avoid losses by the mid-2020s,” CWR informed.
By examining outcomes of investment approaches in a range of future scenarios in the newbuild drybulk fleet (60,000–99,999 dwt), the research assesses whether the industry is exposed to climate policy-driven risks and how to manage these risks.
The 18-month research project identified that while some financial stakeholders are aware of stranded asset risks, few banks assess ship efficiency or have lending programmes in place to keep assets competitive.
Although this is not an easy time for shipping finance, decarbonisation “can still be a win-win on profit and climate for shipping desks, but they will have to be more proactive and live up to the green reputation that many of their institutions hold,” Jules Kortenhorst, CEO, Carbon War Room and Rocky Mountain Institute, said.
“Financiers should be future-proofing investments and preparing to harness the new opportunities decarbonisation will create,” Kortenhorst added.
Navigating Decarbonisation is the third installment of research on stranded assets and climate risk in shipping from CWR and UMAS. It offers a method to analyse how GHG mitigation policies in shipping and national contributions under the Paris Agreement could impact existing and future investments in shipping.