• 2023 November 30 17:14

    64% mull cutting maritime investments amid ESG concerns, reveals Woodrow study

    Some 64% of senior finance professionals in the UK are contemplating reducing their investment in the maritime sector because of Environmental, Social, and Governance (ESG) risks, according to a recent study from Sustainability and communications consultancy Woodrow, according to Offshore Energy.

    The report sheds light on key areas of ESG risk perceived by lenders and investors, including labour rights, climate change and regulatory compliance. It also assesses risk perceptions in specific maritime sectors such as shipping, ports and terminals, and offshore activities like drilling.

    The survey engaged 100 senior finance professionals from various segments of the UK capital markets, including commercial and investment banks, asset managers, development and multilateral banks, as well as private equity firms.

    ESG factors are increasingly instrumental in shaping a company’s financial future. In the maritime sector, issues like poor wastewater management affecting biodiversity, or subpar working conditions on ships, carry potential regulatory repercussions and reputational damage. These are not just ethical concerns but critical factors that investors, lenders, and underwriters are incorporating into their capital allocation strategies.

    Given the capital-intensive nature of maritime activities—ranging from shipbuilding to pioneering new fuel technologies—secure access to financing is crucial, heightening the need for effective ESG risk management.

    Two-thirds (66%) of respondents believe that the maritime sector faces greater ESG-related financial risks compared to other industries. This perception is particularly strong among those managing debt capital (73.5%) and among large institutions with assets under management (AUM) ranging from £10 billion to £100 billion (75%)., the study said.

    Perceptions differ according to the type of financial institution and its exposure to maritime assets. Investment banks were the most concerned (83.3%), whereas multilateral banks and IFIs were less aligned, with only 40% sharing this view. High maritime exposure led to higher concern (69.7%), compared to limited exposure (52.9%), the study finds.

    The report further unveiled widespread skepticism about the maritime sector’s ESG awareness and transparency, with 57% considering the sector less aware and 56% criticizing its transparency. This skepticism is heightened among those handling equity capital—66.7% questioned the sector’s awareness and 64.1% its transparency.

    The type and size of institutions influenced these perceptions. Larger institutions (AUM between £10-£100 billion) generally agreed with these negative views, while smaller institutions (AUM < £1 billion) were less convinced, according to Woodrow.

    Survey participants cited several areas of ESG vulnerability for maritime assets, with worker conditions and safety at 38%, technological disruptions at 34% and climate impact at 33%. Concerns varied depending on the type of capital managed and the level of maritime exposure.

    Equity managers prioritised climate impact (38%), while debt managers focused on biodiversity (41%). Those dealing with hybrid capital expressed most concern about technological disruptions (41%) and water management (44%).

    Among specific maritime industries, Shipping and Maritime Technology & Equipment were viewed as the riskiest, each cited by 17% of respondents. They were followed by Ports & Terminals and Naval & Defence, both at 12%.

    High exposure to maritime assets heightened concerns about Shipping (24.2%), whereas exploratory stages of investment led to increased focus on Maritime Technology (28.6%).

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