Sustainability and Decarbonisation in the Shipping Industry

Sustainability in the Shipping Industry – Road to Decarbonisation

By Nicole Lim

The shipping industry accounts for almost 3% [1] of the world’s emissions, and arguably accounts for the largest proportion of many organisations’ Scope 3 emissions. Yet, it is the most efficient form of transport of goods, compared to air, road or rail. More than ever, COVID-19 has shown the importance of shipping in preserving supply chains and transporting essential goods across the globe. With such a significant role to play, the shipping and maritime industry is key in ensuring the world meets climate goals set out in the Paris Agreement.


This year’s World Maritime Day was themed Sustainable Shipping for a Sustainable Planet, aimed at creating awareness of the UN SDGs and to create the opportunity for the industry to reflect upon the work done and the steps that can be taken towards a sustainable future. This comes as the industry takes big strides to move towards a decarbonised future.

In 2018, the International Maritime Organization (IMO) developed an initial strategy on the reduction of greenhouse gas (GHG) emissions from ships, which lays out key targets and signals for the industry to follow. Referred to as IMO2050, this strategy is ambitious, with the following goals:

  • Reduce CO2 emissions intensity by at least 40% by 2030, pursuing a 70% reduction in 2050 [2]
  • Absolute reduction by at least 50% by 2050, pursuing efforts to phase them out by the end of the century, consistent with the Paris Agreement

IMO strategy for reductions in GHG emissions from shipping

Figure 1. GHG emission gap between IMO GHG strategy and BAU emissions (DNV-GL 2019) [3].



IMO actions to reduce GHG emissions from shipping

Figure 2. Illustration of overall GHG reduction pathway to achieve IMO2050, taking into account a wide list of short-, mid- and long-term measures.

Source: IMO Action to Reduce GHG Emissions from International Shipping


To bridge the emissions gap (Figure 2) and the IMO2050 goals, the maritime industry would have to develop solutions that do not yet exist today – from new fuels to better ship design and to better ways of operating.


Challenges faced today

While IMO2050 is a strong signal to the industry and definitely sets the right path forward, there is still a long way to go from where the shipping industry stands today.

Shipping is a capital-intensive industry. Ships, in particular, require a large amount of capital upfront and coupled with the long lifespan of ships. This creates lock-ins for shipping companies and can pose as a significant challenge to change.

Alternative fuels and new technologies are seen as vital and almost central to cutting emissions from ships. Many of the low-emission solutions needed are still untested, and there is a need for financing and initial investments to co-fund or pay for the development and implementation of such solutions. However, there is presently a lack of incentives and push to channel such financing to the industry.

Finally, the industry consists of a complex network of actors, with a largely fragmented ownership of the world’s shipping fleet. The world’s top 10 ship owners make up less than 20% of global capacity, with the remaining 80% of the fleet owned by smaller ship owners with a few ships each. Then there are other actors in the value chain, such as engine manufacturers, ship builders, ship managers and so on – often with a similar structure of fragmentation [4]. This hence makes it very difficult to get consensus and achieve industry-wide standards as well as transparency.

Transparency, particularly for GHG emissions, is especially important for decision-making for financing solutions and green investments.


Opportunities and Singapore’s Role

However, with every risk and challenge, comes an opportunity. Singapore is well placed to seize the opportunities and lead to way towards decarbonisation of the shipping industry.

Singapore is one of the world’s busiest ports and is the leading maritime capital of the world [5].


As a leading maritime capital and one of the world’s busiest ports, Singapore has a role to play to set standards and regulations for the industry, such as in pushing for greater alignment and transparency in emissions disclosures.


As a financial hub, Singapore is well placed to create green financing mechanisms for the shipping industry. This year, many Singapore-based companies have been making headlines for successful implementation of various sustainable finance agreements [6], [7], [8], [9].


As a sustainability leader (on many fronts), Singapore’s strategic geographical location is its biggest natural resource, and it is only appropriate that the sustainability agenda is reflected in its maritime sector as well.


Singapore is on the right track – Next year, the Maritime Port Authority (MPA) of Singapore will launch the Maritime Singapore Decarbonisation Blueprint 2050, which will set out strategies to achieve a sustainable maritime Singapore. MPA has also launched its Maritime GreenFuture Fund, worth $40 million, to create ecosystems for the test-bedding of low-carbon technologies [10].

This sends a strong signal to the industry that Singapore is prepared and ready to seize the various opportunities that come with moving towards decarbonisation.


Paia has strong expertise in climate change and carbon management strategy. We assist clients with carbon profiling, accounting, reduction and reporting. Paia has worked with key players in the Singapore maritime sector, including government bodies, and is well-placed to assist shipping companies with their climate change and carbon strategy and reporting. Do reach out to us if you would like to find out more.


[1] IEA Energy Technology Perspectives 2017

[2] Intensity calculated as CO2 emissions per transport work

[3] Maritime Forecast to 2050, Energy Transition Outlook 2019

[4] Decarbonising Shipping: All Hands on Deck

[5] The Leading Maritime Capitals of the World 2019

[6] CapitaLand obtains S$500 million sustainability-linked bilateral loan – the largest in Singapore’s real estate sector, 28 May 2020

[7] CIMB and Starhub Ink RM270M Sustainability-Linked Loan Agreement, 19 September 2020

[8] Deutsche Bank and Olam International close Asia’s first FX Forward using ESG performance targets, 26 June 2020

[9] NUS raises S$300 million in its inaugural green bond issuance, 27 May 2020

[10] Speech by Senior Minister of State for Transport and Health Lam Pin Min at The Ministry of Transport’s Committee of Supply Debate 2020 Sustainable & Competitive Industries and Sustainable Environment with a focus on Aviation, Maritime and Active Mobility, 5 March 2020

economic recovery or climate action

Economic Recovery or Climate Action? Why Not Both?

By Adrian Pang

The raging COVID-19 pandemic that has gripped the world like a whirlwind, and social upheavals that have morphed into different beasts in different countries across the world have truly elevated the prominence of the “S” in ESG in a tumultuous 2020.

It is undeniable that these two events will fundamentally change how societies and the world organises and works. Social consciousness on public health and diversity have reached new heights. Even so, the pandemic and global economic fallout have slightly shifted primary discourses away from climate actions and environmental responsibilities – from momentum to transition to green economies and sustainable business models, to now focus on economic survival and resilience. In the short term, there are expected reductions of resources and budgets for sustainability due to economic fallout from the pandemic. But short-term economic recovery plans are insufficient to building long-term business resilience to face considerable climate risk.

Institutions need to create more socioeconomically and environmentally responsible strategies that address systemic changes required to transition to a low zero carbon global economy simultaneously with issues of human rights, racial, income and gender inequality, and overall health and wellbeing. Sustainable/Green Finance can be a substantial driver to lead a post pandemic world that values the wellbeing and survivability of the environment and society.

What is Sustainable/Green Finance

While there is not a formalised definition, green financing is generally perceived as financial flows (from banking, micro-credit, insurance, and investment) prioritising ESG risks and opportunities while still ensuring decent, if not positive rate of return. Green financing values social and environmental factors, impacts and sustainability. [1] It also brings accountability in business and financial decisions and strategies for the future. As the global economy reels from the pandemic, green financing is making significant headway into economic recovery plans. Entities in the public, private and not-for-profit sectors are encompassing this financial paradigm shift into their business continuity plans and economic resilience strategies.

Green Finance in Post-COVID 19 World

The COVID-19 crisis is seen as a rude awakening and a major stress test for the world’s social and financial systems to prepare for the long-term climate crisis. It is understandable that financial interventions and stimulus packages by countries need to address short-term health and economic weaknesses. However, governments should also strive to reshape ecosystems, investments, and production and consumption patterns through green financing to realise a resilient, and sustainable recovery as well as future. [2] The Financial Times argues that cost of climate inaction would amount to a staggering $600 trillion by 2100. This is inevitable at the current trajectory, as the world will not see its carbon emissions halved by 2030 as set out by the Paris Agreement. 2030 is also the expected year of climate tipping point – the point of no return for the climate crisis. Therefore, drastic measures like Green Finance are required now to make systemic changes in the post pandemic world.

The World Bank has recently published a guide for financial regulators in emerging economies to scale up green finance in their countries. [3] The guide can help financial institutions to structure and refine green finance products (e.g. loans, credits, and guarantees) as well as encourage investors to invest in impact investments opportunities that comply with sustainability criterions. The European Union is pushing for a Green Deal for economic recoveries post pandemic. The regional bloc has set up a new “Green Recovery Alliance” that brings together politicians, CEOs, NGOs, think tanks and subject matter experts across the continent to identify and drive green finance and investments. Elsewhere, the slogan “Build Back Better” is increasingly a catchphrase for many governments to tailor their economic recovery strategies to incorporate low-carbon and clean economic developments. Hong Kong and China have implemented mandatory ESG disclosure for companies while French bank Natixis voluntarily incorporated climate risk into its credit decision-making process. [4] South Korea has also pledged to a “Green New Deal” as it recovers from the COVID-19 induced economic losses. [5] Overall, there are encouraging signs that countries are embarking on the green path to economic recoveries.

Moving Forward and Organisations’ Roles

The conundrum between prioritising economic recovery or climate action remains needlessly real. Indeed, countries in Asia, of which many are emerging economies remain reliant on restoring traditional economic and financial fundamentals (which are often carbon intensive) to reboot their economies. [6] This is counterproductive to global progress made on the sustainability front.

2020 is on course to record the largest drop of GHG emissions, estimated at 8% year on year. [7] However, this reduction is due to enforced lockdowns and decreased traffic volumes globally and it is likely to be an one-off anomaly post-pandemic. The world needs to achieve at least 7.6% reduction annually between 2020 to 2030 to keep global temperature increase to less than 1.5 degree Celsius by the end of the century.

The bottom line remains, we need to protect the Earth now more than ever. The pandemic is a good reset for how things work. In fact, the world is ready for a paradigm shift on green finance where climate and sustainability elements can closely entwine with economic recovery and development.

Companies and organisations also have significant roles and responsibilities in realising more sustainable development and popularising green finance post COVID-19. Some possible actions are: working with governments to stimulate green recoveries, supercharging corporate resilience and prioritising climate risks, bailouts or financial tools with sustainability strings attached, enhancing ESG performance and disclosure, altering business models and practices, and identifying sustainable values in business deals and developments.[8] All these potential strategies can involve and abide by values of green financing. We have seen a strong push for the big “S” in 2020, let us also push for the big “E” and “G”.

Reach out to us to find more about how you can enhance your sustainability/ESG strategies and performances as well as how green financing could work for your organisation or business.










The Link between Corruption and Human Rights

By Sanjala Hari

Human rights, particularly in the recent times, has been a key topic within the ESG space. With this, there is also growing traction of the role that corruption plays in impeding human rights. Corruption hinders effective discharge of human rights obligations diverting resources needed for safe and humane working conditions and preventing the right to fair trial. According to a study, countries with high rates of corruption are the ones with a poor human rights record (Transparency International’s Corruption Perceptions Index, 2017).

If we look at the conventional sustainability venn-diagram, it consists of Environmental, Social and Governance components. The three components overlap and influence the way businesses perform. Such is the overlap between corruption – a governance topic, and human rights – a social topic. Corruption is prevalent in businesses where there is unjust balance of powers, or where there is lack of transparency of information flow and decisions. Corruption through bribery or extortion often leads to oppressing the rights of the lesser-privileged workforce.

Due to complex global supply chains, businesses often operate in regions of the world where corruption is prevalent. Transparency has been one of the biggest challenges in global supply chains in eradicating corruption and in-turn human rights abuses. Transparency issues occur due to poor information sharing. In most cases, governance management of businesses work in silo of the social and environmental management. To facilitate good governance and prevent social abuses among supply chain players, buying companies must aim for procurement reforms that include strict provisions on all three – environmental, social and governance topics, in their contract decisions and supplier assessments. This would mean including all departments involved with environmental, social and governance management within a business and procurement practice to bring out effective reforms.

Human rights violations caused by corruption activities does not affect all workforce equally. Marginalised and discriminated groups are often the ones most affected. These include the poorer sections of the society, indigenous people, and women. Community consultation is key to prevent human rights violations. Contracts behind closed doors that do not take community consultations into considerations are often considered human rights violations. Businesses need to strengthen their due diligence work and whistle-blowing mechanisms to not only prevent corruption, such as bribery and extortion, but also prevent the human rights abuses that follow.

2015 GRESB Masterclass: Sustainability and Best Practices in ESG as a part of the AsiaPac Property Leaders Summit 2015 in Singapore

Paia recently attended the GRESB Masterclass held in Singapore. GRESB, an industry-driven organization committed to assessing the sustainability performance of real estate portfolios (public, private and direct) conducted a Masterclass. GRES, has a pivotal role in transforming the current landscape as more organisations develop a strong business case to incorporate sustainability in their operations. The focus of the discussions was on rapidly changing regulatory climate and expectations in the Asia Pacific property industry.

Green buildings and spaces are seen as a solution to the crowded, unsustainable cities of the previous decades. Despite higher costs, there is a strong business case for retrofitting buildings as they age leading to huge savings. There is a marked interest in renewable energy (solar voltaic panels) and green buildings by investors, owners, tenants, regulators and other stakeholders who are investing in real estate which is capable of sustaining itself in terms of energy and water usage. Environmental, social, and governance (ESG) issues are becoming central to the long-term future of businesses as stakeholders demand more transparency. This becomes imperative as new regulatory developments lead to more stringent laws for energy usage and disclosure. Increased demand for information and transparency on the sustainability performance of property companies and fund managers is also another cause for the drive towards greener spaces. This is also evident as we see a rapid development of standards, benchmarks and certification schemes globally.

Companies such as Keppel Reit Management, one of the largest real estate investment trusts (REITs) listed on the Singapore Exchange, Redwood Group Asia, a specialized logistics warehouse real estate investment firm with a geographic focus on Asia, offices in China and Japan and Capital Land Limited, one of Asia’s largest real estate companies – were present to talk about how sustainability is incorporated into their businesses and new operations. The sustainability leaders from these organisations provided valuable insights into sustainability practices across the global property industry. Capital Land was proud to share insights into their Hangzhou Raffles City project, which is the 1st LEED Gold project in Zejiang at the GRESB Masterclass.

Based on the questions from the audience, which included investors, fund managers and real estate companies, about developing a stronger business case for incorporating sustainability and for green buildings for investors – it seems that sustainability is here to stay at the forefront of business’s agendas.

sustainability indexes asia

Sustainability in Asia in early stages but much progress has been made

The journey for sustainability in Asia is young, but sustainability professionals are encouraged by the progress.

After SGX released a policy statement and guide to sustainability reporting in June 2011,  The Business Times examined the role of sustainability indices and disclosure for investments.

Carrie Johnson, Director of Paia Consulting, was invited to share her thoughts on the Asian Sustainability Rating (ASR), an analysis of listed companies’ disclosure on sustainability issues.

The following is extracted from the actual article published in the Business Times:

Carrie Johnson, director of Paia Consulting sees the index as a catalyst for change. She says:

‘Sustainability indexes significantly help sustainability issues get credibility at the senior management level. Once the senior management team realises that investors are taking sustainability seriously, it helps raise the profile of sustainability internally. In fact, companies that list on sustainability indexes get exposure to a wider range of investors, who may not otherwise consider them. Several investor analysts now include sustainability risks in their overall risk assessment of companies. Being on a sustainability index helps reassure those investors that sustainability risks are being managed.’

Much progress made in sustainability in Asia – full article on Eco-Business.