What Would A ‘Divest Global Shipping’ Campaign Look Like To Save Our Ocean?

Global shipping has failed the planet. The industry is the world’s sixth largest emitter of greenhouse gases and continues to increase pollution in the world’s oceans.

It is governed by weak environmental regulations. The industry controversially opted out of the 2015 Paris Agreement on Climate Change. The head of its UN regulator, the London-based International Maritime Organization (IMO), tried to publicly undermine the ambition level of the EU on shipping emissions this summer.  Then just over a week ago, the shipping industry announced plans to continue increasing emissions by 14% by the end of the decade when the rest of the world is trying to reduce absolute emissions by 40% in prevent runaway climate change.

This comes as hundreds of thousands of seafarers are stuck on ships around the world in what is being described as a ‘humanitarian crisis,’ with the number of maritime safety incidents skyrocketing this year, leading to a significantly higher risk of major oil spills and marine pollution around the world.

This is not the actions of an industry that is serious about the planet (or its workers).

Shipping is on the front lines of the climate crisis

What is particularly surprising is that shipping should have been one of the loudest corporate voices for climate action, given that the ocean will be one of the earliest and most dramatically impacted areas of the planet in years to come. Warmer and more acidic oceans (the oceans have absorbed 90% of global heat and 30% of manmade carbon dioxide) will lead to more violent and unpredictable storms. But these mainly affect the lives of seafarers, and not the corporate owners of shipping who spend more than half their time on dry land.

In two weeks’ time in London, 16-20 November 2020, there will be a final vote at the UN Shipping Agency, the IMO, on whether to make these weak, Paris-breaking climate targets effectively international law. This is the vote at the IMO’s Japan-led Marine Environment Protection Committee (MEPC) that is being held virtually for the first time. So far, Governments around the world have not shown a willingness to stand up to the IMO (or its controversial Environmental Committee). They have been silently complicit in agreeing to targets that break the Paris Agreement.

It would be better not to have a greenhouse gas agreement in shipping at all, rather than offer a paper-thin cloak of legitimacy for global shipping to justify carbon-intensive pollution without any meaningful control (which is what the IMO has done in other areas of marine pollution too).

Shipping is not the first sector where an industry or regulator have refused to reform themselves. One of the most successful environmental campaigns waged against reluctant industries has aimed at companies where it hurts most – access to finance.

This is known as divestment.

In global shipping, divestment would extend to three areas:

• Divestment directly from Global Shipping Companies, including their holding companies. This would be targeted a companies that do not have a short term (less than five year) plan towards major decarbonization by the end of the decade.

• Divestment from Banks and Finance companies supporting global shipping, especially the large banks and ship insurers that provide low cost financing to shipping companies with few environmental conditions attached.
• Taxpayer divestment from the $80m a year UN shipping regulator, the IMO itself. In much the same way that the ‘defund the police’ campaigns in the US around the police brutality has forced greater disclosure and accountability as part of the Black Lives Matter movement.

It could target the holdings and financing of some the biggest investors in the world, such as Berkshire Hathaway, Blackrock, Bridgewater Associates, Goldman Sachs, Nordea, Bank of America Merrill Lynch who all have positions in shipping and shipping finance.

What is divestment?

Divestment is when investors withdraw funds from companies or an entire sector due to them not meeting certain targets or operating in unethical ways. It was used successfully during apartheid in South Africa to put pressure on international businesses that were supportive, tolerant or silent about apartheid policies.

Most recently, campaign groups have used divestment to exert pressure on industries that support the fossil fuel industry.

With global shipping – just like all industries – there are good corporate actors and bad ones (it is that simple). Global divestment is designed to punish bad corporate actors, allowing more reform-oriented companies to receive a higher premium in the market.

One of the leading international organizations in the divestment movement is 350.org led by May Boeve. 350.org is so named after the concentration of carbon in the atmosphere to achieve a stable and safe climate. The world is currently at 410 parts per million – the highest the planet has seen in over 800,000 years.

Boeve describes how effective the divestment movement has been in shifting corporate behavior on fossil fuels.

“In the beginning divestment was created as a political tool to weaken the fossil fuel stronghold on our political systems. However, after its enormous success and with the absence of much needed regulations to limit that industry, the divestment is now one piece of a much bigger picture of a campaign to stop the flow of money to the fossil fuel industry.

There are three converging trends that spell doom for the fossil fuel industry.

1)   Banks – private ( such as Crédit Agricole in France) and public (such as the European Investment Bank), are cutting financing for fossil fuel projects.

2)   Insurance companies such as Axa are ending underwriting for coal projects worldwide.

3)   The divestment movement keeps drying up investment capital to the companies perpetuating climate chaos. Without bank loans, insurance and investments – and with ever less support from wider society — the fossil fuel industry hits a wall.”

Has divestment worked?

“So far funds worth over $14 trillion have pledged to divest from fossil fuels, partially thanks to relentless campaigning by activists all over the world,” Boeve continued.

“This has shifted the discourse on fossil fuel finance and helped raise awareness about the role that institutions such as universities and churches, as well as pension funds, play in keeping the fossil fuel industry afloat.  The divestment movement along with volatile oil fossil fuel markets casted doubt about the political legitimacy and the economic sustainability of this industry

The divestment campaign has also fundamentally shifted market norms and put the issue of who finances fossil fuels squarely on the agenda.”

Carbon disclosure as a first step

One of first steps to divestment is carbon disclosure. Not disclosing the amount of greenhouse gases being emitted (carbon and methane), is in itself a warning indicator, in much the same way that robust Know Your Customer (KYC) procedures work for Anti-Money Laundering legislation.

This is where another international non profit group called the Carbon Disclosure Project (CDP) has been influential. They run the the global carbon disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. Over the past 15 years the CDP’s carbon disclosure system has transformed the way many companies engage on climate issues.

Dexter Galvin, Global Director of Corporations & Supply Chains at the Carbon Disclosure Project, shares how much of an impact carbon disclosure has had on various industries.

“We know that disclosure works: We see that the more companies disclose their environmental data, the more likely they are to take action.

For example, 38% of suppliers responding to CDP for the first time have emission reduction targets in place. By their third year of disclosure, some 69% of companies have set a target.”

So by forcing disclosure, within a few years, powerful behavior change occurs – in this case an almost doubling of companies with targets. This is where the IMO (as well as other UN institutions governing the ocean) have failed.  With the UN’s global shipping regulator, data is (intentionally?) poorly collected, curated and disclosed, meaning that shipping companies have gotten away with more environmental pollution than has been realized until now. With today’s advances in technology and data science, there should be no excuse for such weak data protocols at the IMO.

Damming report on carbon disclosure in global shipping

The CDP has done an assessment of companies in global shipping to assess where they are on carbon disclosure. Some of their findings are shocking for an industry that is the sixth largest emitter worldwide.

With only around 60,000 major ocean-going ships, global shipping makes up one third of global freight emissions (1 billion tons compared to 3 billion tons of global carbon emissions from transportation). Of the 2,604 companies that were the best disclosers of carbon emissions in 2019, only 500 disclosed carbon emissions in their supply chain, and less than 5% (110) were transport operators and logistics providers themselves.

The CDP concludes that “there is a lack of transparency due to under-disclosure by global shipping companies.” The world came together for the coronavirus crisis, but shipping does not seem to be collaborative for the climate crisis.

Other key takeaways from the CDP report on carbon disclosure in the global shipping sector:

• Low Board level oversight of climate issues compared to other industries. Only three companies have a formal climate or environmental committee at the board level.
• Disclosure is poor for the sector. Only four companies are official supporters of the G20’s Carbon Disclosure work (TCFD) and only five transport companies completed CDP’s Climate Change questionnaire.
• Ambition is low. Only two shipping companies are targeting net zero emissions by 2050, and only two more have science-based targets. Of 12 transport companies that disclosed emission reduction targets, half of these are targets out to 2050 (well beyond any meaningful action needs to be taken by today’s executives).

• Impact has stagnated. Emissions from the Bulk Carriers (like the MOL-chartered Wakashio that ran aground in Mauritius) and Oil Tanker divisions have stagnated with emission intensities from both sectors increasing 1% and 0.5% p.a. on average over the same period.
• Immediate short-term solutions to reduce emissions by 30% exist.  Slow steaming is an important short-term lever capable of delivering emission reductions of around 30% – only 13 of companies were found to have a slow steaming strategy.

• Shipping is not investing enough in longer term solutions. Electrification, Biofuels, Hydrogen and Ammonia based fuels can deliver significant emission reductions but are under invested in with only a few companies showing evidence of collaborating to facilitate their development.

• Certain shipping sectors are having a double-negative impact on carbon emissions. Bulk carriers and oil tanker companies transporting thermal coal and oil products are having a doubly negative impact on global carbon emissions by using fossil fuels to transport more fossil fuels. For example, charterer of the bulk carrier Wakashio, Mitsui OSK Lines that has one of the largest fleets of coal bulk carriers and oil tankers in the world.

The lack of urgency by global shipping seems to be ignoring realities of the planet, according to environmental NGO Ocean Conservancy who also issued a report on carbon emissions in shipping this summer. “In order to restrain warming to within 2 degrees, total decarbonization must be achieved in the same time frame of 2050,” Dan Hubbell, Ocean Conservancy’s Shipping Emissions Campaign Manager, said. “To achieve the IMO’s goal and also halt climate change, the first zero-emission ships must be on the water by 2030.”

What could a divestment strategy look like for shipping?

Given the reluctance of shipping to take actions themselves, environmental organizations may wish to consider three areas where a divestment campaign could have the greatest impact. This would allow more responsible actors in global shipping to emerge.

1. Divest directly from shipping companies

This would have three steps:

• Force carbon disclosure. Any companies that are not disclosing carbon emissions should be placed on a shipping emissions ‘black list.’ The bigger, listed companies should be acting responsibly as demanded by shareholders. The privately held businesses that do not disclose will eventually be squeezed to disclose.
• Divest from listed companies that do not have short term plans. 2050 carbon emission targets are essentially greenwashing. If an executive has no action plan within the next 12-24 months for how to transition (including research options), then they are not taking carbon disclosure seriously enough. Divestment should begin with companies without short-term carbon reduction plans.
• Pressure global shipping’s customers. Customers of global shipping need to be pressured to disclose carbon emissions in their supply chain, whether the large retail customers such as Amazon, Walmart, Apple or car companies such as Tesla. This addresses the container and car carrier segment of global shipping. For bulk carriers (used for coal) and oil tankers, these are segments that transport fossil fuels and should be divested from anyway, as they allow the fossil fuel industry to continue operating.

2. Divest banking and asset managers who fund shipping including shipping insurance. 

Large finance institutions give the shipping industry cheap financing without any environmental strings. This has allowed the shipping industry to continue building larger and more damaging ships without any accountability or liability, as the Indian Ocean island of Mauritius has seen.

It is the complex world of shipping insurance that has allowed global shipping to increase in size, without paying for the commensurate amount of risk such large ships now present to the environment and other coastal communities. For example, larger vessels should be double-hulled, not single-hulled, which was what has led to riskier shipping operations around the world.

3.      Defund the IMO

Each year, $80m of taxpayer money from around the world is spent on the IMO. Yet, the IMO is not acting on behalf of taxpayers or the environment, but instead, in favor of wealthy shipowners. There is a need to move from a centralized shipping agency to a more effective set of regional shipping regulators. There are parallels in other sectors where regional organizations around each ocean basin (e.g., Atlantic, Pacific, Indian, Arctic, Southern Oceans) would be more effective than attempting to shoe-horn a ‘one size fits all’ approach with the IMO. This has been the de-facto direction the world is going in, with European Emissions Trading Scheme, US Emissions Disclosure Scheme and both Antarctica and Arctic having their own shipping policies. The IMO’s days should be numbered to lead to more effective policing of global shipping.

Potential for divestment campaign on global shipping

May Boeve from 350.org gave her perspective on a divestment campaign on global shipping. “Divestment along with campaigns on direct and indirect finance, can definitely be a lever in the larger effort to force the shipping industry to deal with the reality of their outsized impact on emissions, not just CO2, but increasingly methane.

Banks, insurers and institutional investors can send a strong signal to the industry by conditioning their loans and investments to a credible pathway to the complete electrification of the shipping industry.

The shipping industry is also a key link in the fossil fuel distribution chain.  We saw that when oil prices crashed and oil tankers were used as storage space as in-land oil storage rapidly filled up in an unprecedented context of low prices and low demand.

Part of the transition plan needs also to include strengthened security measures to make sure no new oil spills happen like the recent disaster in Mauritius.”

Protests against global shipping

Other campaign organizations have started to look at the impact of global shipping as well as the forces that have been preventing reform. A spokesperson for Ocean Rebellion, Clive Russell, explained how several protests were coordinated against the IMO a fortnight ago at the start of climate talks on global shipping at the IMO.

“Ocean Rebellion organized three protests against the IMO. Firstly at the IMO, then at the Panama Embassy and finally at the Japan Embassy. By linking these three polluting protagonists Ocean Rebellion is pointing where the power lies – not with a UN international body acting on humanities’ behalf, but at a UN international body regulating on behalf of two nations and the shipping and fossil fuel industry.”

Shipping decarbonization is essential for Climate Change

Dexter Galvin from the Carbon Disclosure Project also highlights the importance of focusing on the global shipping industry in order to meet the Paris Agreement on Climate Change.

“Given its high emissions and integral position in the global economy, decarbonization of the shipping industry is crucial to meeting the Paris Agreement and addressing the climate crisis.

The sector has been too long overlooked and is not aiming high enough. Even with current technology, the shipping industry can afford to be much more ambitious. Recent research by UMAS shows tough rules on operational efficiency can cut 2030 emissions by 43% compared to business as usual.

We need to see strong regulation, transparent and comprehensive disclosure of emissions and ambitious action by companies and investors.”

Galvin goes on to say regardless of actions at the IMO, carbon disclosure needs to be part of standard business reporting.

“Disclosure is valuable whether or not we have sufficient regulation, because the greater transparency provides accountability and informs better decisions by other stakeholders in the economy.  It also highlights the need for regulation and informs better policy.  Only with clear, comparable and robust data on absolute emissions, emissions intensity, targets, strategies and other climate information can we take effective action and track progress towards climate goals.”

He argues that the CDP provides the most robust and accepted framework through which global shipping should start aligning their disclosures with. “CDP has pioneered disclosure over the last 20 years and now over 9,600 companies, covering over 50% of global market cap are disclosing their environmental data each year.

However, this varies drastically by sector and previous CDP research has shown the disclosure rate in shipping and the broader freight sector is low.

The market demand for a sea change on shipping climate disclosure is growing, as more and more large companies set science-based targets and use CDP’s supply chain program to demand transparency from their suppliers.”

Specific focus on the role of Japan in global shipping

Japan has one of the largest shipping industries in the world. If its three largest companies were combined, it would be 40% larger than Maersk. This does not even include the ship service sectors such as shipbuilding yards (that are under pressure from competition in South Korea and China), salvage operations and other ship service sectors.

Japan made a bold push toward 2050 carbon target, but it controls the IMO’s Environment Committee.

It has pushed a more damaging policy that will take the world beyond the Paris Agreement.

If Japan was serious about climate it would do two things: 1. Publish a plan for short term targets (i.e., with a decade). 2. It would take a pro-Paris Agreement stance at the IMO and present a more credible plan that reduce shipping emissions by 2030, with enforcement starting in the next two years (not the end of the decade).

350.org’s May Boeve was also critical about the lack of short term targets with Japan’s recent climate announcement. “Japan is very influential in the IMO, with much at stake for its own shipping industry.

They have recently declared they want to be in line with the Paris Agreement, although stating a net zero objective by 2050 without short term goals is not a sign of real leadership.

If Japan is serious about being a climate leader, then it’s time they changed their backward position on the sustainability of shipping. The climate movement is keeping a close watch.”

CDP’s Dexter Galvin says that eventually change will catch up with all actors in the global shipping industry.

“CDP’s theory of change is that transparency leads to insight and accountability which leads to action. CDP data is used by our 515 investor signatories and over 150 supply chain members to inform their investment and procurement activity based on environmental data.

CDP also uses the data disclosed by over 9,600 companies to produce our own analysis and reports on a wide range of sectors and environmental topics. Our data is used by numerous NGOs and academics and it feeds the whole ESG ecosystem of investment research, products, indices and ratings including Bloomberg, STOXX, Trucost, FTSE/Russell, MSCI ESG, ISS ESG and Goldman Sachs.

CDP data is also key to tracking the action by companies taking part in Science Based Targets initiative and the RE100 initiative.”

Global shipping in the firing line

So if the global shipping industry has been unwilling to reform itself and lobbied for weaker climate legislation, it has now put itself in the firing line for a global divestment effort.

Light will now need to be shone on this hidden industry that has operated for so long in the dark.

As hundreds of thousands of seafarers put their lives at risk around the world, it is the owners and investors in shipping companies who are the ones who have been seen flouting international laws.

A sector where executives do not understand their industry

Shipping executives have appeared incredibly naïve about their industry. The shipping industry will encounter more change in the next decade than the previous 100 years. This change is coming – whether on the terms of the global shipping industry, or on terms that will be imposed by regulators, technological and environmental forces.

The tectonic plates of the global economy and global shipping industry’s business models are shifting. Many complain about the ‘cut throat’ competition, which is why they are unable to invest. This is a weak excuse.

Shipping executives have completely missed the point. Those shipping companies that disclose their emissions and can receive a price and market premium.

With a younger generation of consumers and investors demanding greater corporate transparency about the carbon footprint of their products, they expect to see carbon budgets associated with products shipped from abroad.

E-commerce firms like Amazon and Alibaba, have so far resisted calls to disclose the carbon footprint of online products (including all shipping costs in the production and delivery).  It is only a matter of time before investors demand disclosure here too. This would also force disclosure from global shipping.

Shipping has proven it cannot reform itself

The MOL-chartered Wakashio oil spill in Mauritius embodies the dirty side of shipping. A variety of underhand tricks have been used to undermine the efforts of conservationists and community workers trying to care of those impacted.

Powerful corporate interests have been attempting to silence the voices of these community actors and conservationists, with Covid-19 acting as a convenient shield preventing other international observers from seeing what is really happening on the ground. The true costs of large ships powered by harmful fossil fuels are being hidden and shouldered by poorer coastal communities than the global shipping lines themselves.

The divestment movement is a response to an industry that has proven unwilling to listen so far. Perhaps carbon emission data should be directly linked to executive compensation (including the compensation of the regulators).

Only then will the world really start to see some action.