Seatrade Maritime is part of the Informa Markets Division of Informa PLC
This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.
See All Geographies »
See All Topics »
See All Videos & Podcasts »
See All Coverage Cloud »
Simon Ring, Global Head of Maritime Trade Technologies & ESG at Pole Star | Oct 04, 2022
Having concentrated on unplugging Russia from the global trading system following the invasion of Ukraine, international regulators are bound to intensify their focus on carbon emissions in maritime transport as part of the wider the environmental and social agenda.
The European Union is, for example, embarking on the next phase of its Emissions Trading System (ETS), which is only months away, aiming to include the maritime industry in its target of 55% net reduction in greenhouse gas emissions by 2030. This will involve full disclosure of routes, fuels and speeds.
Related: Everyone must adapt to Russian sanctions as the new normal – here’s how
Although the costs of compliance may be debated between owners and charterers, we can be certain major trade banks and commodities companies will want to distance themselves from use of shipping with inefficient engines or dirty fuel. Incentivised green trade finance is likely to become much more prevalent.
Yet to make quick progress in line with the deadlines imposed by the EU, IMO and COP26 as they aim for net zero, trade finance banks will need to screen every transaction for carbon emissions. In time, they will have to include environmental degradation, deforestation and child labour in their evaluation of each deal or application for finance or insurance.
For banks, this task appears immense, requiring an end-to-end view of the financial and physical supply chains in thousands of transactions. But since carbon emissions are viewed as the most urgent and the most immediately fixable item on the sustainability agenda, that is where they are certain to concentrate. Banks will want to see that vessels are as fuel-efficient and green as is reasonable, that they follow the optimum route and travel at the most efficient speed. In the near-future banks are likely to need evidence vessels use sustainably produced methanol, hydrogen, or other cleaner fuels.
To do so efficiently and without a huge amount of skilled employee time they must implement solutions that integrate with the screening systems they already use, folding them into their portfolio of know-your-customer (KYC) and trade-based-money-laundering (TBML) detection platforms.
There are clear signs countries such as Iran, Syria and North Korea will be very active in seeking ways round the draconian sanctions they face while the sanctions against Russia continue.
It therefore makes sense for sanctions and sustainability monitoring to go together, using the same data, screening against public information, peer group and Paris Climate Accord rankings, along with wider risk and adverse sentiment monitoring.
Banks are also heavily scrutinised by regulators and must provide reporting data, which will ultimately make disclosure a necessity for all parties in global trade. Unfortunately, research by Pole Star found a technology gap in two of the main trade and shipping hubs in Europe – Switzerland and the UK. This is likely to be replicated around the globe.
The shortfall in screening capabilities not only inflicts costs, but also increases risk of regulatory penalties. Banks lack sufficient screening and monitoring capabilities to have full end-to-end transparency on which to base benchmarks and incentives for green trade practices. As a result, they cannot yet take full advantage of the green business opportunity. Shipping companies, carriers, forwarders and charterers meanwhile, lack technology to demonstrate compliance, meaning they miss out on preferential terms and a significant amount of business.
The whole global trade finance ecosystem should acquire more advanced and automated screening technology as a business and compliance priority. Although sustainable fuel technologies may be costly initially, green trade finance will be profitable business once automation streamlines screening and monitoring. Carriers will need to respond, by gaining the ability to demonstrate compliance in near real-time and show they are committed to sustainability.
Once these capabilities are in place, carbon reduction will definitely be back in black as a major business opportunity for some considerable time.
Copyright © 2022. All rights reserved. Seatrade, a trading name of Informa Markets (UK) Limited.
More information about text formats
Follow us: