Shooting the Messenger? Shipping Carries the Can as Investors Shun Coal

Shipping companies that transport the world’s coal are in the crosshairs of some financial backers who are cleaning up their businesses in the absence of a truly global drive by nations to renounce the dirtiest fossil fuel.

In a sign of investors taking the initiative, six European firms collectively representing over 5% of the estimated annual $16 billion capital financing requirements of the dry bulk industry told Reuters they were either reducing their exposure to vessels that transport coal or were considering doing so.

Such carriers – titanic vessels stretching up to 270 meters (885 ft) long and able to carry hundreds of thousands of tonnes of cargo – are the cheapest way to transport coal and other commodities like iron ore and grain in large quantities.

Swiss Re told Reuters that from 2023 it would no longer cover the transport of thermal coal via reinsurance treaties, where it covers a portfolio of insurers’ policies. It exited the direct insurance of coal cargoes in 2018.

“There is much more pressure on the insurance companies in terms of ESG,” said Patrizia Kern-Ferretti, head of marine at Swiss Re Corporate Solutions, referring to the sustainable investment sphere. “I hear from brokers they are having difficulty placing coal policies in the insurance market,” she added. “More and more companies are applying direct guidelines.”

Esben Saxbeck Larsen, senior portfolio manager at Denmark’s Danica Pension, said it favored greener shipping firms as they provided the best risk/return characteristics. The fund has “close dialogue” with firms about their ESG strategies.

“If we are uncomfortable with such answers, we will not invest in the company,” he added, without elaborating on the specifics of the methodology.

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