The Maritime industry has seen a number of setbacks in recent years, leading to major changes and challenges for those involved. Many companies are now looking towards green investing as the solution; environmental compliances increasing by 3% every single year is one such development that investors have taken note of.
Green investing looks to clean up the maritime industry. The green investment is a new movement that has been popping up over the last few years. It’s a way for people to invest in sustainable businesses and companies that are looking to make a difference in the world.
The first green bonds were issued. They’ve become blue now.
Seaspan Corp., the world’s biggest containership lessor by cargo-carrying capacity, issued over $1 billion in “blue bonds” earlier this year, pledging to support vessels that would reduce emissions and pollution at sea.
The transaction exemplifies how the sustainable investment boom is spreading to the world’s waterways. The debt is the most recent incarnation of green bonds, which are investments that attempt to combat climate change and accelerate the transition away from fossil fuels by lowering the cost of funding such initiatives.
Seaspan, which has a fleet of 132 ships, sought $500 million in bonds from asset managers in July to pay for ships that minimize carbon emissions—the company’s first U.S. blue bond. The sale drew more investors than expected, enabling the business to expand the size of its junk-rated offering to $750 million in eight-year notes with a 5.5 percent annual return.
The transaction highlights how demand for environmentally friendly debt has increased in recent years, as part of Wall Street’s drive to market products that incorporate environmental, social, and governance, or ESG, issues. In 2018, the Seychelles archipelago and the World Bank issued the world’s first blue bond, generating $15 million. BNP Paribas SA said on Friday that it has arranged a $942.5 million blue bond for Bank of China.
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Green bonds were originally issued approximately a decade ago by high-rated borrowers who agreed to meet long-term sustainability goals. Wall Street is now selling a record amount of debt. According to estimates from the Climate Bonds Initiative, global green bond issuance in 2021 will exceed $350 billion, breaking the previous record set in 2020.
“We regard marking a green bond blue as an attempt to improve attention on concerns relating to the marine environment,” Nicholas Pfaff, the International Capital Market Association’s director of sustainable finance, said.
In principle, recruiting more investors, especially those looking for environmentally friendly assets, could lower the cost of financing for green businesses. This is especially important in shipping, where the epidemic has hindered ambitions by members of the International Maritime Organization, the UN’s maritime regulator, to increase fuel economy by 30% by 2025 and cut greenhouse-gas emissions in half by 2050 compared to 2008 levels.
“‘We regard labelling a green bond blue as an attempt to raise attention on problems concerning the marine environment,’ says the company.
— International Capital Market Association’s Nicholas Pfaff
The absence of a low-emitting fuel that is economically available at scale is one of the issues confronting the marine sector. While Seaspan runs ships all around the world, it is ultimately up to its customers to choose which fuel to use. As a result, the business is designing boats with tanks that can be switched out to handle different fuel types, as well as cutting-edge designs that vary the vessel’s form, nose, and propulsion systems. The majority of the company’s new container ships run on liquefied natural gas.
Atlas Corp., Seaspan’s parent company, is devoted to building a sustainable business in accordance with green efforts, according to Bing Chen, president and chief executive officer.
The ICMA’s green-bond principles, a set of rules established by the European self-regulatory organization, are followed by Seaspan’s blue bonds. According to an ICMA research done this year, more than 95 percent of environmental financing agreements in 2020 followed the trade association’s recommendations.
Green bonds and other kinds of sustainable-linked finance, according to some investors, lack an enforceable framework to guarantee that funds are utilized as promised. Green bond rating agencies report to no governmental body in the United States. The small print on certain bonds says that not all of the funds obtained must be used for environmental initiatives.
Green bonds have evolved into blue debt, which is the most recent form of such assets. In April, the Seaspan Thames was awaiting offloading at Seattle’s port.
Paul Christian Gordon/Zuma Press/Zuma Press/Zuma Press/Zuma Press/Zuma
Companies who fail to keep their environmental pledges or reach their objectives are likely to face criticism and penalties the next time they want to borrow, according to some experts.
Neuberger Berman’s head of European ESG investment, Sarah Peasey, said the asset management selects its green bonds carefully, avoiding one-time transactions that seem to be made just to benefit from the label.
“For us, it’s first and foremost about appraising the business at a sustainable level,” Ms. Peasey said, “since the risk lies with the broader company, not the bond offering.”
Others are concerned that Wall Street would overwhelm investors with a plethora of specialty items. Mr. Pfaff of the ICMA, a Zurich-based trade organisation, said that the number of specialized bonds should be limited.
“Creating wide and consistent categories has been the whole success in ESG over the last two years,” he remarked.
Julia-Ambra Verlaine can be reached at Julia.Verlaine@wsj.com.
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