Sustainable investment: How climate protection becomes a competitive advantage

Sustainable investment: How climate protection becomes a competitive advantage

April 2021 | A sustainable investment is no longer a trend, but a reality. Today, German private investors already invest one in ten euros sustainably, and by 2025 this figure is expected to rise to one in four euros. According to a study by Puls Marktforschung for the private bank Quirin, one in five private investors wants to switch their financial investments entirely to sustainability. Lucrative returns and the good feeling of doing something meaningful with their money are probably what drive most people here. 

But climate protection is not only good for the environment. CO2 efficiency measures are also increasingly developing as a competitive advantage. And that can have significant advantages for investors. Our example: shipping and the Vogemann Green Ship Token.

Shipping is considered an environmental offender par excellence. That this is not necessarily the case is another matter, see also our article on the topic of environmental protection in shipping. Nevertheless, the reputation does mean that the industry is faced with high demands. 

Strict guidelines limit CO2 emissions

Binding guidelines from the International Maritime Organisation regarding the CO₂ emissions of new ships have been in force since 2015. For cargo ships, the Energy Efficiency Design Index (EEDI) has been the decisive factor up to now. It puts the emissions of a ship in relation to its transport capacity. Currently, we are in phase one, in which the CO2 values must be 10 per cent lower than the specified guideline value. The second phase (at least 20 per cent CO₂ savings) begins in 2025, and from 2029 the third phase applies to newbuildings to be delivered, which must demonstrate at least 30 per cent CO₂ savings.

These strict rules were further tightened in 2020. The new EEXI (Energy Efficiency Existing Ship Index) is no longer only about new buildings, but also the existing fleet.  It obliges almost the entire travelling world merchant fleet to reduce its current CO2 emissions by up to 50 per cent from 2023 onwards, depending on the type of ship. If we look at the worldwide fleet of handysize bulkers, 90 percent of all ships do not yet meet these standards. The Hamburg-based shipping company Vogemann stands out here: with the two Green Dolphins “Voge Sophie” and “Sea Eagle”, it has already had two newbuildings completed in 2019 that already meet the requirements of the third phase. As the only Handysize Bulker in the world, by the way. So, ecologically, Vogemann is almost ten years ahead of its time.

Overview of the Handysize fleet with around 2,700 ships between 22,000 and 42,000 ts deadweight.

Handysize bulker fleet with regards to EEXI

It is clear to see that only slightly more than 10% of the existing fleet complies with the IMO requirements. All the remaining Handysize bulkers fail to meet the EEXI limit and must drastically reduce CO2 emissions.

Energy efficiency saves the environment – and the budget

In addition to the emission values, increasing energy efficiency also plays an important role. After all, the cleanest and cheapest fuel is still the one that is not consumed in the first place.

Vogemann therefore relies on state-of-the-art diesel engines. Green Dolphins like the Voge Sophie consume considerably less fuel than conventional handysize bulkers. In figures, this is a saving of 30 to 50 percent at unchanged speed. Even at a speed of 12 knots, the Vogemann bulkers consume only 15 tonnes of fuel per day. That is nine tonnes less than many other ships. These will have to reduce their speed considerably in order to reach the required values.

This is clearly noticeable in the operating costs. Depending on the number of days at sea and the oil prices, this leads to annual fuel savings of more than 1,000 tonnes:

  • Fuel savings of more than 1,500 tonnes,
  • fuel cost reductions of more than 600,000 US dollars and
  • a reduction in CO₂ emissions of more than 3,000 tonnes.

Comparison of fuel consumption

Emissions trading to be extended to shipping in 2022

Environmentally friendly ships not only protect the climate, but also save massively on operating costs and achieve higher charter rates. Ships with high CO2 emissions, on the other hand, will have financial disadvantages in future. It could also be that they will no longer be allowed to call at certain ports.

An example that will already become reality next year:

Until now, shipping has not been included in European emissions trading. This is to change in 2022. In 2020, the European Parliament voted that ship operators will then also have to buy CO2 emission allowances for their ships of 5000 gross registered tonnes or more in the EU Emissions Trading Scheme. Legislation is still pending.

25 euros per tonne of CO2 will then be due. From the currently around 138 million tonnes of CO2 from ships’ holds within EU waters, a levy of up to four billion euros is calculated, according to Die Welt

The auctioning of emission certificates could be used to finance an “ocean fund”. The money would be used to make ships more energy-efficient and to support investments in innovative technologies and infrastructure, such as alternative fuels and green ports. Twenty per cent of the revenues from the fund should be used “to better protect, restore and efficiently manage marine ecosystems affected by global warming”, according to the parliamentary proposal.

Other strong demands come from the industry itself

But these amounts seem comparatively small. Of all things, demands are coming from the industry itself that will lead to significantly higher burdens. In the run-up to US President Joe Biden’s climate summit at the end of April, respected shipping organisations are calling on the participating heads of state in an open letter to discuss the introduction of a tax on CO2 emissions from the shipping industry. Included are including Bimco, the International Chamber of Shipping (ICS), the World Shipping Council (WSC) and the Cruise Lines International Association.

A plan that could fall on open ears. The USA has already communicated that it wants to reduce its emissions of greenhouse gases by 50 to 52 percent by 2030 compared to 2005. In doing so, the Biden administration is fulfilling a requirement of the Paris Climate Agreement. His predecessor Donald Trump withdrew. According to shippingwatch.com, net zero emissions are to be achieved by 2050, and this also applies to shipping. By way of comparison, the IMO’s current climate targets still envisage a halving of emissions by the same date. 

At this link you can watch John Kerry’s speech, which the US President’s special envoy for climate issues gave at an Ocean Conservancy online conference prior to the summit.

The oil trading group Trafigura has already submitted a concrete proposal for the introduction of a CO2 levy for shipping to IMO in 2020. Low-CO2 or CO2-free fuels are to be subsidised, while CO2-intensive ones are to be burdened with levies. Their idea: 250 to 300 US dollars per tonne. 

Bonus instead of malus: Cyprus plans eco-bonus

Cyprus wants to reduce the tonnage tax by 30 percent for shipowners who use environmentally friendly ships. Already today, no taxes are levied on profits from the operation of ships registered here, nor on dividends from shipping companies.The country is one of the ten leading maritime nations in the world.

Vogemann positions itself as a pioneer and thus offers a sustainable investment

“It is clear that excellent emission values as early as next year will also lead to significant commercial benefits in ongoing ship operations,” says Patrick Schütze. He is Managing Director of neoFIN Hamburg GmbH. “Who will benefit from this right from the start is the Vogemann shipping company. Vogemann has already been focusing on CO2 and fuel efficiency for years. The company is impressively demonstrating how ecology and economy go hand in hand. Their bulkers perfectly combine economic efficiency and high acceptance in the charter market with significantly reduced emissions for the environment. As an investor in the Green Ship Token, you too can benefit from this pioneering role.”

An investment in the Green Ship Token makes a sustainable contribution to environmentally friendly shipping. In the process, investors receive 8 per cent interest p.a. On top if the business develops accordingly: a share in the profits. You can find out more about this in this post.