Shipbreaking practices being influenced by principles of ethical investing

Wednesday, 16 May 2018 23:16:34 (GMT+3)   |   San Diego
       

The practice of breaking vessels along the beach has been widely criticized due to the pollution on the sea and land as well as poor work environment practices for the employees.

Investor firms are reportedly now selling stakes in firms due to being “out of fit” with their sustainability policies, part of their ethical investing practices. Norway’s $1 trillion Oil Fund sold its stake in Taiwan’s Evergreen Marine, Precious Shipping and Thoresen Thai Agencies (TTA) of Thailand, and Korea Line. Other investing entities including pension funds have reportedly followed suit and are divesting shares in entities that they see as not fitting their ethical investing objectives. The move is expected to encourage companies to seek better labor and ship breaking practices. Institutional investors wish to engage ship breaking companies to encourage change prior to divesting stake, but divesting the stake is a move they are willing to make if not satisfied.

Approximately 80 percent of the aging commercial ships are broken up on the beaches of Bangladesh, Pakistan, and India. As they change policies and practices to meet investor’s standards it may dampen their competitiveness. Simultaneously, the shipping industry is facing a difficult time with financing, financial sources estimate shipping companies face a $30 billion funding gap in 2018. While 90 percent of global trade is transported by ship, the industry is emerging financially from a difficult decade that included over-ordering of ships. Despite the challenges and the need for higher earning when selling ships for ship breaking in South Asia, financing entities will be incorporating their borrowers’ policies into the lending assessment.

Kristin Holth, DNB’s leader for Ocean Industries stated, “We believe actors that do not take the environmental and social risk seriously will have problems accessing capital markets in the future.” 


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