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ESG and SDG discussions - from hype to practicality

There is a significant buzz concerning ESG/SDG (​​UN Sustainable Development Goals), which attracts massive political, academic, and corporate attention. However, it is hard to understand what is happening on a practical level. We therefore decided to address two specific related topics that influence theDOCK and the entire maritime sector. First is the EU Council's decision to include maritime shipping emissions under the EU Emissions Trading System (ETS). Second, is the rapid increase in the # of ESG/SDG-driven tech startups, ranging from fintech platforms, through monitoring solutions to HW/infrastructure for carbon reduction.

  • The EU Council’s Decision. Practically, the new scheme includes placing an obligation on shipping companies to cover allowances for all emissions on voyages within the EU and 50% of voyages between EU and non-EU ports for vessels with a gross tonnage of over 5,000 tonnes. This means that once enforced, emissions will bear a price tag, and the market will transition from a voluntary emissions control market to a more disciplined/regulated socially responsible market.

One additional evidence for the proactive approach of shipping companies to differentiate themselves based on ‘green-related’ merits can be seen by Maersk's recent decision to quit the ICS (international Chamber of Shipping) following disagreements around it’s SDG goals setting.

  • ESG/SDG-driven Tech Startups. In the past few months we experienced a significant increase in the number of startups that, regardless of the technology or the product, rely their business model on ESG/SDG incentives. Put it into numbers, as part of theDOCK’s deal flow/CRM records we counted 25+ new startups in H1-2022 alone which fit this criteria.

We are happy to share additional observations on the new companies and technologies we run across. We decided to group them as follows:

  1. Fintech platforms - We see many “Fintech’ and trading environments forming and offering corporations capabilities to trade their ‘emissions’. These include government bond assets, as well as hedging practices. Speaking of the maritime sector - we also noticed platforms offering innovative calculations of the entire life cycle carbon emissions of assets (e.g. vessels) all the way to the scraping stage. This provides for sustainable ‘end of life’ planning and the ability to cash in today from such planning.

  2. Monitoring Software Solutions - one layer underneath the above mentioned layer, we observed many ‘monitoring solutions’. These are all aimed at providing extra visibility to operational aspects such as carbon footprint and various other polluting emissions. These solutions also provide dashboards and other UI/UX to allow improved visibility. A few of the solutions aimed to also provide actionable advice (rather than just monitoring and visibility). Such advice included recommendations and actual decision making protocols recommending to the operator how to improve its actions to achieve better SDG performance.

  3. Hardware Solutions - these solutions can be broken into two types. The first include innovative sensing technologies which range from real time fuel sensing and bunker quality monitoring to innovative optical sensors which aspire to recognize irregularities from space. The second type of hardware solutions include heavy duty modifications to propulsion systems in order to allow easy dual-fuel/hybrid systems transitions. Here is a link to an interesting funding round published in TechCrunch.

Our conclusion - ESG/SDG metrics, carbon taxes and regulatory frameworks are all here to stay. As with any new segment, we will need to navigate through the noisy hype (aka Green Wash) and cherry pick the solutions which stand a chance to deliver real value and therefore get traction in the market.

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