Fathom Q: Where will the capital for shipping come from?
The shipping industry has a number of policies in place but getting the right funding for them and to help with the transformation of shipping can be difficult. This week, we ask, where will this capital come from and how will it flow from various sources to shipping’s transition?”
“There is no shortage of capital in the world. We need clear, strong policy to overcome market barriers and harness markets for decarbonisation. Good policy needs to create a profit motive for investing in decarbonisation.”
“We’re seeing a transition towards lease financing and a maybe a paradigm shift in ship financing. Capital is needed for shipping and my opinion is that capital will always find a way in, in any way it can.”
Di Gilpin, Founder CEO at Smart Green Shipping Alliance
“When we have talked to investors they have said that shipping is scary, because it is special and we don’t know anything about it so it might be a really great project but we don’t like the idea of dabbling in shipping. We have got shipping investors saying that they don’t really think emissions are a problem at the moment and so whatever you’re telling us about emission reduction is not that relevant to us right now.
So then there is the whole social impact network of investors and a massive community addressing this but there is an imbalance. There are some social impact investors but there is a whole raft of solutions which I define as 21st Century system solution thinking. What we have is a 20th Century investment market and a 21st Century systems solutions attempting to be put into that.
We have been really innovative about data and technology so now we have to be innovative about finance. If we use our project as an example: we are using a much higher degree of free-to-use renewable energy and it changes the operational dynamics of an asset. It allows us to decouple from bunkers and all the cost and availability variables around bunker arrangements. This future-proofing allows to go about designing a vessel with a 20-30 year life, and so we can start to play around with the economic dynamics between opex and capex.
We start to look at how renewable energy it financed onshore, clean tech lease agreements, and even alternative currencies. We are working in a collaborative network where the idea of technology and allowing concept and cargo owners to work across the ecosystem to bring in all of the players around owners, operators, naval architects to ground engineering. This is what we’re doing to address it.
What we really need to do as an industry is to tell better stories and paint this as a global challenge. There is a massive capability to match the matrix of solutions with these wicked problems – we’ve seen that here today at SCC – we need to continue to generate enthusiasm to be part of solving it. We can change the narrative, make it exciting. We need to get involved now and build teams so that in 2030 the prize will be flourishing fit-for-purpose shipping businesses. We need to move across barriers with collaborative relationships and identify those as part of a symbiotic relationship.
It is hugely complicated and a very complex industry and that is what makes it so attractive as a challenge.”
Natalie Vigar, Research & Operations Officer, Sustainable Shipping Initiative
“There is a new generation of ships that need to have technologies on-board already, and there is a short period of time to make this happen. The industry will need to undertake a step change in order to implement these technological advances and create innovate solutions to decarbonisation and the methods used to finance these solutions. Many of the businesses are small family owned organisations, where the ship-owners own one or two ships so trying to implement change may be difficult due to the risks involved. Without this change though we will not be able to evolve into a low carbon era, additionally part of this step change is developing innovate financing streams and working holistically, therefore the industry must work collectively to address the long term goal of decarbonisation.”