We’re Gonna Need a Better Boat

“Radical innovation” is needed in the next 10 years for a zero-carbon fleet by 2050 and asset managers should build an in-house capacity to deal with the challenges of ESG rating metrics rather than rely on the rating agencies, John Kornerup Bang, Head of Sustainability Strategy and Chief Advisor on Climate Change at Maersk, says in a podcast hosted by Man Group’s Co-Head of Responsible Investment Jason Mitchell.

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Climate change is a “strategic driver for innovation” for the shipping industry, according to John Kornerup Bang, Head of Sustainability Strategy and Chief Advisor on Climate Change at Maersk.

Maersk’s own climate journey was kick-started by a series of articles in 2009 that indicated that the company emitted the same amount of carbon-dioxide as the entire nation of Denmark, Kornerup Bang said in a podcast hosted by Jason Mitchell, co-head of responsible investment at Man Group.

“As a family-controlled company founded on strong values [which emphasise] giving back to society, this led to our first strategy to reduce emissions,” he said. “What then became apparent was how much money you could save by reducing emissions. We geared up our engineering team to look for savings and optimization of our network, to design the ships differently, which has enabled us to be an industry leader for the last 10 years.”

“Radical Innovation”

Since then, the dynamic of innovation has changed. “Customers also started to set very aggressive targets for their supply chains, moving from a 50% reduction toward a zero-carbon target,” Kornerup Bang said in the podcast. “Production is the biggest factor in a supply chain, so initially there was little interest [in Maersk’s contribution], but when targets moved toward zero, customers had to address all sectors.”

Kornerup Bang also highlighted Maersk’s efforts to foster innovation within the shipping sector. ”The current technology which propels shipping cannot get us to zero-carbon through efficiencies,” he said. “To achieve a zero-carbon fleet by 2050 [assuming a 20-year asset cycle], we need to have the first zero-carbon vessel on the water by 2030, which is only 11 years from now. We need to mobilise the market, the shipbuilders, the engine manufacturers, and the finance industry, to make radical innovation happen over the next 10 years.”

ESG Ratings: Box-ticking Without Creating Value?

Separately, asset managers should – and are increasingly starting to – build an in-house capacity to deal with the challenges of ESG rating metrics rather than rely on the rating agencies, Kornerup Bang told Mitchell.

Asset managers should rely “much less” on ESG ratings agencies as they “are not standardised” and the “tick-box” exercise doesn’t add to value creation, he said.

Figure 1. Lack of Standardisation Between ESG Ratings Agencies

Source: Financial Times1, CLSA, Asian Corporate Governance Association; as of 6 December 2018.

“A lot of asset managers are really starting to see climate change – but also sustainability issues broader – as a real proxy for risk management,” Kornerup Bang said. “Risk management is always specific; specific to an asset base, specific to markets, specific to business models.” As such, building an in-house capacity would allow asset managers to have an open dialogue with the corporate sector and work on the metrics from a risk-management point-of-view, he said.

To listen to the full podcast go to: man.com/ri-podcast

 

1. https://ftalphaville.ft.com/2018/12/06/1544076001000/Lies--damned-lies-and-ESG-rating-methodologies/

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