Investors are sniffing around shipping stocks in numbers not seen in years, according to participants in this week’s Capital Link International Shipping Forum webinar.
But while those ranks increase, the portion of investors asking loud questions about environmental, social and governance (ESG) matters is dwindling in the aftermath of Russia’s 24 February invasion of Ukraine, experts said.
To be more precise, they’re backing off on the “E” more so than the “S” or “G” as concerns over near-term “energy security” begin to overshadow demands to transition to alternative fuels and renewables that may still be a thing of the distant future.
As the US, Western Europe and others begin to seek alternatives to Russian energy sources, harsh realities are focusing minds on the continued relevance of fossil fuels even as pundits say the eventual necessity to transition away from them is also getting a boost.
“I think there’s been a big change in the last month,” said veteran analyst Magnus Fyhr of investment bank HC Wainwright in a panel appearance.
“People are realising we may have gone a little too fast into this ESG and we all need energy resources going forward.
“I think the shipping industry has done an excellent job with the ESG initiative — maybe even pushing a little too hard. I think investors realise maybe some of these older industries need to be revived again.”
Fyhr was not alone in detecting a trend.
“ESG is not as prevalent a topic as it was six months or a year ago. There’s certainly been a pullback,” said Jefferies lead shipping analyst Randy Giveans.
But Greg Lewis of BTIG called for caution in evaluating the shifting winds.
“Had the pendulum swung too far in one direction? Yes,” Lewis said. “Has it now swung too far in the other direction, saying that ESG doesn’t matter? Yes.
“ESG investing is here to stay. I don’t think anyone is saying ‘I’m an ESG investor and I’m going to go out and buy an oil company’.”
But it wasn’t just analysts noting a re-evaluation of priorities. The topic broke out earlier in the day on a panel dedicated to the global economy’s impact on shipping.
Reality check
Those weighing in included Marco Fiori, chief executive of Italian product tanker owner Premuda, who spoke on the speed of energy transition.
“People think this can happen in a few years. No, it will take time. I’m not saying not to adapt, but let’s have some realistic expectations. People have been living in a little bit of a dreamland. Sometimes people need a reality-check.”
If that’s what has been provided by the aggression of Russian President Vladimir Putin, perhaps there is a knock-on effect for public shipowners and their shares.
It may be a secondary factor, as experts say there’s been a rotation of investors out of growth stocks like technology listings and into energy and equities backed by physical assets — such as shipping — since November, well before Putin invaded.
The bigger driver has been the spectre of inflation and the reality that rising interest rates will be the tonic applied by regulators such as the US Federal Reserve bank.
The 29 US-listed shipowners covered by investment bank Jefferies are now up 29.7% year to date and 51.6% year over year.
Calls. So many calls
“Our analyst Ben Nolan has never seen more calls coming in from investors who want to talk about shipping,” Stifel investment banker Chris Weyers told a capital markets panel.
He noted that LNG — a mooted beneficiary of Russian dislocation — is the hot query.
“The [overall] level of interest is two to three times what it was last year,” Weyers said.
Clarksons Platou Securities analyst Omar Nokta has been around shipping since 2003, when the industry was gearing up for its last supercycle.
“For the last decade or so, we’ve had a real lack of interest,” he said. “Stocks sold off and investors focused on other things.
“Now the investor pool is getting bigger. It seems like the pool of capital will be much deeper than anything we’ve been used to in the past five or 10 years.”
More ship finance news
- Management of New York-listed Atlas arranged a formal investor day at the New York Stock Exchange and tried to explain the mission of the company once called Seaspan Corp. Click here to read the story.
- Spanish owner Balearia has clinched the country’s first sustainable loan for shipping in an €80m ($89m) syndicated financing led by CaixaBank. Click here to read the story.
- Norwegian asset manager Ness Risan & Partners has revealed a return for investors of 187% from its shipping portfolio in 2021. Click here to read the story.
