Enhanced due-diligence undertaken today by financiers, shipowners, and shareholders can help deliver long-term value and avoid losses by the mid-2020s
UMAS and Carbon War Room (CWR) have released research that suggests climate transition pathways pose risks to the banks that hold $400 billion of global shipping debt, and lays out the first approach to climate stress-testing of shipping assets. Navigating Decarbonisation: An approach to evaluate shipping’s risks and opportunities associated with climate change mitigation policy 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.
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. This is the first known scenario analysis of decarbonisation risks in shipping.
The key takeaway from the report is for financiers and shipowners to be prepared and thus it is crucial to future-proof assets now and plan for flexibility from the onset, through for example, designing for future retrofits and using innovative financing mechanisms to deal with a variety of future scenarios. Scenario analysis that combines an integrated techno-economic assessment with a number of foreseeable policy scenarios can help navigate future uncertainties and help financiers and shipowners make more informed decisions about their assets.
The full report is available to download here.