EV Private Equity ‘actively searching’ to invest in green shipping

EV Private Equity ‘actively searching’ to invest in green shipping

Financing next-generation solutions will drive significant carbon reductions for the decades ahead, writes sustainable energy investor EV Private Equity Senior Partner and Impact Lead, Einar Gamman, and Lars Sund, Associate.

The global shipping sector, backed by targeted financial investments, can make a considerable contribution to carbon reductions as part of the wider energy transition.

More than 90% of everything we consume is moved by sea, and the associated CO2 footprint is thought to be around 940m tonnes per annum – c. 2.5% of global emissions annually.

Efforts to reduce the impact of shipping include electrification, alternative fuels and improved efficiencies, among others. Innovative technologies promise to boost the impact of all three.

Uptake has, however, at times been patchy, both across and within various geographies and segments. The hard-to-abate emissions from large, long-distance shipping pose particular challenges.

Sustainable energy investor EV Private Equity is committed to support accelerating the necessary transition; we are actively searching for companies and technologies that can reduce greenhouse gas emissions from shipping, meeting our pledge to cut carbon emissions while in parallel producing attractive financial returns.

Uncharted waters 

The scale of the challenge is significant. Emissions under a business as usual scenario is forecasted to climb steeply in the post-Covid landscape as economies around the world come back to life.

In tandem with the rising global shipping demands, the International Maritime Organization (IMO) has pledged to reduce emissions by at least 50% by 2050 compared with 2008 levels, with an additional ambition to phase out emissions from shipping entirely “as soon as possible in this century”.

A wide-ranging strategy, to be updated next year, includes measures to improve operational fleet efficiencies, optimise the speed of vessels, improve port facilities (including onshore power), and to boost research and development into alternative fuels and related changes impacting marine propulsion.

The broad goal is supported by the Clydebank Declaration, adopted at COP26 by more than 20 countries and designed to create green shipping corridors. Signatories have pledged to facilitate partnerships between ports, address regulatory and infrastructure issues, and boost environmental and sustainability criteria.

All hands on deck 

Efficiency has a huge role to play. Investments in onboard operations and systems, including electrification and operative AI/ML systems, can significantly reduce emissions and improve the overall energy performance of global fleets.

Improved hull and propulsion systems designs, together with factors like speed selection, will all contribute to optimised fuel use. Fleet management opportunities like anti-fouling treatment, vessel size, and navigation planning are also seen as key transition enablers. Additionally, important developments like the shift to battery-powered vessels are already gaining ground, albeit mostly for short routes and for smaller ships.

Onshore power at port facilities around the world, in addition to streamlined logistics, will also contribute substantially to decarbonisation by reducing emissions associated with loading, unloading, maintenance, and other at-anchor activities.

Broad adoption of alternative green fuels with acceptable energy density still looks to be a longer-term play. Hydrogen, ammonia, LPG and biofuels have yet to produce the combined environmental and economic outcome to meet the current demands of large ships on long-distance routes.

In fact, certification body DNV-GL estimates current uptake at no more than 1%, with less than 10% of new builds being ordered with alternative fuel propulsion systems. Cost, availability, infrastructure and onboard storage – in addition to the energy density issue – are all blamed for the lack of uptake. However, this is an exciting opportunity in a more long-term development perspective.

Going digital 

Innovation across the full range of digital, intelligent technologies is an emerging area of particular interest with regards to shipping-related activities, having the potential to propel the industry towards substantial efficiency gains over the coming years.

Digital twins, leveraged big data, automation and machine learning are all emerging and gaining ground, while also opening the door to innovations that have yet to gain traction.

Initiatives like the EU-supported Digital Twin 4 Green Shipping are indicative of what can be accomplished.

Additionally, the “smart shipping” project aims to boost carbon reduction efforts through 2030 by leveraging open digital twin frameworks. This will enable ship operators to optimise navigation and route planning (in real time), propulsion dynamics, hull maintenance and construction, as well as the overall energy management.

These tools can facilitate improvements to existing fleets relatively quickly, through optimisation of efficiencies made through operational, in-port and fleet management practices. In addition, digitalisation can also accelerate adoption of next-generation technologies by enhancing fuel flexibility and future proofing during the anticipated transition period. Alongside, of course, continued development of the initial building blocks of efficiency, operations, ship design and adoption.

Financing the future   

To be aligned with the global climate ambition stated in the Paris Agreement, global shipping will have to undergo significant changes over the coming years. The sector has the opportunity to make a substantial contribution to carbon reduction efforts and is adopting a range of technologies that can translate ambition into practice.

At EV Private Equity, we are ready to support companies and transformational technologies as part of our commitment to remove one tonne of CO2 from the atmosphere for every $300 invested, as measured by carbon accounting software platform, xIQ.

The tool allows us to accurately assess, measure and report on the net total impact of any company’s greenhouse gas emissions; it is central to our ambition of delivering a substantial and meaningful impact per dollar invested and the claims of our portfolio of investee companies will be assessed by a third party on an annual basis.

To conclude, we see that technologies and services addressing the global shipping industry are well-aligned with EV Private Equity’s forward-looking investment philosophy.  The sector has massive low-carbon potential, a roadmap for change from the IMO, and a growing appetite for change. We are ready to support shipping on this journey: creating clarity, financing innovation, and – ultimately – accelerating the global energy transition.

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