Seizing opportunities for the establishment of sustainable financing instruments

Green shipping, technology and expertise – German Maritime Centre presents study on financing instruments in the maritime sector.

The availability of equity and debt capital in the shipping and shipbuilding sector has declined sharply in Germany since 2008. This is jeopardising the preservation of national expertise and making the necessary renewal of the German merchant fleet with more energy-efficient, environmentally and climate-friendly ships more difficult. This is the conclusion of a study commissioned by the German Maritime Centre that looks at financing instruments in the maritime industry.

The study prepared by PricewaterhouseCoopers GmbH WPG (PwC) documents and analyses the current state of financing options for the maritime industry in Germany. It compares these with financing and funding opportunities in European and non-European countries where the maritime industry is often seen as particularly important and worth preserving for the national economy.

The study concludes that

  • German shipyards will be affected by further consolidation due to steadily increasing global competitive pressure and as a result of the impact of the COVID-19 pandemic.
  • There is a considerable need for modernisation and renewal for large parts of the German fleet, which must be adapted in line with the constantly growing regulatory requirements, especially in the areas of environmental and climate protection and energy efficiency.
  • The onward march of digitalisation poses great challenges for the industry.

Three central areas of action emerge from the study:

  • Decarbonising maritime shipping or initiating a transformation towards climate-friendly maritime shipping (keyword: green shipping),
  • Maintaining the competitiveness of the maritime sector and security of supply (keyword: economic and technological maritime sovereignty) and
  • Protecting key maritime industries and technologies (keyword: securing the necessary nautical and technical know-how).

Under these three headings, the study’s authors propose not only a strategically coordinated industrial policy at EU level, but also concrete financing instruments such as the establishment of a KfW programme to promote energy-efficient ships. The catalogue of recommendations also includes a proposal to set up a fund to provide capital for shipping companies that intend to build environmentally friendly ships.

The German government should offer guarantees to secure investments, similar to what the Netherlands does with its Nesec Ship Dept Fund (NSDF).

“It is conceivable that institutional investors in particular would invest in such a ‘shipping fund’,” says Claus Brandt, managing director of the German Maritime Centre. “The current revenue situation in the shipping industry makes it interesting to invest in the maritime sector again. Now old ships could be replaced (through retrofitting or new builds) with reduced-emission or zero-emission ships.”

But the climate is not the only reason to invest in new ships: “The coronavirus pandemic has shown us how dependent the German economy is on functioning commodity and supply chains. Europe and Germany must not become dependent on others. It is high time for a coordinated European industrial policy”, says Brandt.

According to the study, dependence on other states could be a threat in ship financing as well. Asian lenders have been playing an increasingly dominant role since the economic and financial crisis of 2008.

“The study’s recommendations for action provide an excellent basis for entering the discussion on how sustainable financing instruments can be designed in Germany and Europe. Access to capital secures green shipping, technology and expertise”, says Runa Jörgens, advisor shipping.

The study is intended to contribute to establishing financing instruments at German and EU level that enable companies in the maritime sector to access equity and debt capital, even in volatile markets.

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