Environment, Sustainability and Governance have taken over the corporate agenda all over several industries. However, even though all businesses are aware of the importance of adding these concepts into their strategy, each area differs on what is most needed for them. According to the Capital Perspectives: Navigating ESG Risks in the Maritime Sector report by Woodrow, “69% believe the sector excels in risk management, indicating a communication gap in showcasing ESG efforts.” Other insights from the report include a concern for increased transparency in the face of a majority of institutions actively considering divestment from the maritime sector seen as more exposed than others, perceived as riskier but ahead in risk management.

Disruptions and risk factors

Worker safety, climate impact and tech disruptions are seen as the biggest maritime risk factors and shipping, maritime technology and ports seen as riskiest industries. Two out of three respondents view the maritime sector as more exposed to ESG risks compared to other industries. According to the report, investors agree that industry risks move in the range between “significantly greater and somewhat greater” compared to other sectors: “This points to a heightened sense of caution and urgency among investors (…) This dominant perception raises important questions about the nature of the perceived risks: Is the maritime sector inherently more fraught with ESG risks, or are these perceptions born from insufficient information or misunderstandings?” reads the document.

However, the report identifies a complex relationship between perceived risk and actual risk management in the maritime sector. “One possible explanation for this divergence could be a communication gap between the maritime industry and financial markets. The industry might be ahead in implementing ESG risk management strategies but has not successfully communicated these efforts to investors and other stakeholders. Alternatively, institutions with sector knowledge may recognize the inherent high risks associated with the maritime sector due to their exposure but feel that the sector is doing a suitable job in mitigating these,” reads the investigation.

 Awareness and transparency

“More than six in 10 respondents are considering divesting from maritime assets due to concerns over the sector’s exposure to ESG-related risk,” the report states. More than half of respondents agree that maritime companies are less aware of their exposure to ESG risk than in other sectors. Respondents indicate that shipping, which includes container shipping, tankers, and bulk carriers, as well as maritime technology and equipment, are perceived to be most vulnerable to ESG related financial risks. “This sentiment is particularly strong among equity capital operators and weakest among hybrid capital operators,” the report indicates.

Increased transparency is another concern among respondents. “Opacity in ESG data disclosure is now seen by investors as hinting at concealed risks, posing financial threats. Investors increasingly favor firms that openly admit their ESG limitations and report demonstrable action to improve, as such transparency suggests superior risk management and enduring value protection,” the findings highlight.

The research was commissioned by Woodrow involving 100 individuals in the UK in senior positions at financial services firms with clients withing the maritime sector. Field work was conducted by Censuswide and executed in accordance with the ESOMAR principles. Results were gathered from 24th September 2023 to 29th September 2023.