Financers pressure shipping industry to clean up its recycling practices

Banks, pension funds and other financial institutions are increasingly asked to take into account social, environmental and governance criteria when selecting asset values or clients. Investing with an eye to environmental or social issues, not just financial returns, is in demand, and the credit providers and investors of shipping are now actively taking a closer look at how they might contribute to a shift towards better ship recycling practices off the beach.  

 

Through what is known as “negative screening”, investors are using the annual lists that the Platform publishes on global dumpers to screen their portfolio. In 2018, Scandinavian pension funds the Norwegian Government Pension Fund Global and KLP divested from four shipping companies due to their beaching practices. The exclusions were made public and with written explanations. Both the breach of international human rights and the severe environmental damage caused by beaching were highlighted as reasons for the divestments.

 

"One particular problem with beaching is that shipbreaking takes place when the vessels are standing in mud and sand. As a result, the pollution leaches into the ground and is washed out with the tides. Even if arrangements were put in place at the beaching sites for the treatment of asbestos and PCBs, for example, the fundamental problem of containing and collecting the pollution would be impossible to resolve. There are better ways of dismantling ships that are readily available to the shipowner, but these are more expensive. "
Council on Ethics - Norwegian Government Pension Fund Global

 

Banks play a crucial role in supporting economic activity through their lending. They can also influence better business practices through engaging with their clients on social, environmental and governance matters. Starting off as a Dutch bank initiative with NIBC, ING and ABN AMRO as founding members, large Scandinavian and German shipping banks are now also part of a group of banks that promote responsible ship recycling and negotiate clauses to that aim in the loan agreements they sign with shipping companies. 

 

"The recycling, or scrapping, of a ship at the end of its lifecycle poses potential large social and environmental risks for the shipping industry, especially if so-called beaching practices are used. These practices mean that ships are driven directly upon beaches and dismantled under difficult working conditions and with detrimental environmental consequences as hazardous waste is discharged directly into the sea."
Nordea Bank

 

The financers of shipping have signaled that there are likely further exclusions to come. In light of the announced decommissioning in the oil and gas sector, it is further likely that investments in oil and gas assets will be also scrutinized. 

 

 

 

Council on Ethics - Recommendation to exclude Evergreen Marine Corp (Taiwan) Ltd from the Government Pension Fund Global (GPFG)

KLP - Shipbreaking practices in India, Bangladesh and Pakistan

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