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A new report concludes that institutional investors can play a key role in providing the new sources of capital that will be essential for the UK’s domestic shipping sector to meet its mid-century decarbonisation targets. The report, UK Domestic Shipping: Mobilizing Investment into Net Zero, has been produced by Marine Capital Ltd with support from UMAS and Lloyd’s Register (LR).
The study reveals that the right government support is needed to unlock the institutional investment that can help fund the path to net-zero. The diverse nature of the UK’s shipping sector, with a wide range of ship types, ship owners and operators and ports and terminals, presents key challenges in the country’s maritime decarbonisation drive.
The report is said to be the most comprehensive study of the UK domestic shipping sector to date. Its findings and recommendations could significantly contribute to the progress of the UK Government’s Clean Maritime Plan.
Through sector case studies, the report shows that a disproportionately large share of emissions comes from the relatively small subsector of ships, offering potential for targeted action. Ferries and ro-ro ships, for example, account for 10% of ships but account for 50% of emissions from domestic and short sea fleets.
Offshore service vessels are another example: and given the UK’s planned expansion into the offshore wind sector, vessels serving the sector are also good candidates for decarbonisation initiatives, the report says.
Constraints that are currently impeding access to new sources of needed funding include uncertainty about future demand and supply of clean fuels, lack of clarity on policy development, and limited access to an appropriate regulatory environment and funding. Although institutional investors, who together represent more than $80trn in assets, can be a viable source of funding, government support will be needed to help them overcome some of these current uncertainties.
Dr Carlo Raucci of LR, decarbonisation consultant at the Classification Society’s Maritime Decarbonisation Hub, commented: “The next three decades will need to see a significant shift in the domestic fleet towards new and retrofitted vessels, zero-carbon fuel production and massive investment in bunkering. Infrastructure with their associated supply chains, which can span multiple related industries across the globe. These are deep, long-term commitments that require an integrated approach by both government and industry to mobilize investment from external sources of capital.
Tony Foster, CEO of Marine Capital, said: “The decarbonisation of shipping presents many challenges. Domestic shipping is very diverse, so just getting to grips with that diversity was a key element in crafting the report. We have highlighted, through case studies, financial mechanisms that can facilitate the participation of institutional capital, particularly in the large-scale fleet renewals that are required. The report clearly shows how progress can be made now and the support the government can provide to unlock this investment.”
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