Investors are increasingly looking at potential investments and analyzing the environmental impact of an investment and that will make capital flow to the companies “that are doing the right things,” said Andrian Roman Dacy, the Chief Investment Officer of J.P. Morgan, on June 2 at the DNV GL meeting at Nor-Shipping in Oslo, Norway.
Shipowners are required to invest significant amounts of capital in order to comply with a number of environmental regulations. For each ship these include several million dollars for ballast water treatment systems, a choice between scrubbers and low sulfur fuel that begins on January 1, 2020 to meet the IMO 2020 sulfur cap and the expected further costs of decarbonization, not to mention investment in digitalization.
Dacy told an audience of shipowners, maritime lawyers and other experts in the shipping industry that the acronym ESG, which stands for the Environmental impact, Social impact and Government control, is increasingly impacting investment decisions and the influence of this analysis will continue to grow over the next two years.
Dacy said that there are pools of capital in sovereign wealth funds, private capital and in particular in pension funds that will look closely at potential investment opportunities to ensure that the ESG criteria is met.
“If companies are not focused on ESG they will not get the necessary capital and without capital companies will not be able to function as part of the industry,” Dacy told the audience.
He went on to say that investors are creating an ESG coefficient to able to measure the environmental impact of an investment opportunity quickly and “in two years’ time this will become a major element of their investment strategy.”
However, Jasmin Fichte, a Managing Partner at Fichte & Company’s Dubai office, United Arab Emirates, was skeptical of the value of new regulations that require major investment and the ability of the average shipowner to meet the increasing costs associated with the regulations.
Fichte argued that there is “a discrepancy between the discussions at conferences and real life.”
She said that in Dubai the average shipowner operates seven ships and his main concern is cash flow and how to pay the next month’s wages. According to the lawyer, these owners are “still using paper and stamps” to write up contracts. “There are a large number of owners not dealing with IMO 2020,” added Fichte.
Across Oslo’s town square at the Grand Hotel, the Mare Forum, a debate among owners, operators and associated senior maritime officials, heard from the floor that most Greek shipowners, currently the largest vessel owning group, still do not believe that IMO 2020 will be enforced.
Speaking from the Mare Forum podium, Clay Maitland, the Marshall Islands representative, said that he had seen documents from the Union of Greek Shipowners that targeted the reversal of the “tidal wave” of environmental regulation, “I don’t believe that’s going to happen, do you?” Maitland asked rhetorically.