Oil spill highlights risks of Singapore’s marine ambitions

Welcome back. Today we focus on a story that gives a window into the push to clean up the vast global shipping industry — and the tensions and dilemmas that can plague national efforts to ride the waves of the energy transition — with Mercedes Ruehl’s report from Singapore.

Meanwhile, on the other side of the world, it’s been a mixed season for sustainability-related resolutions at shareholder meetings in the US. We digest some of the key numbers.

Have a great weekend — we’ll see you on Monday. — Simon Mundy

Green fuel

The pollution risks of Singapore’s bunkering strategy

Singapore’s beaches and coastal parks have been unusually quiet in recent days. The city-state’s southern coastline became a sea of black after a dredging boat hit a bunker vessel on June 14, spilling more than 400 tonnes of oil into the ocean.

The pungent kerosene smell has hit inhabitants of the mostly man-made resort island of Sentosa, which many billionaires call home. A clean-up is under way but could take months to clear fully.

Singapore is an integral part of the global shipping industry given its strategic geographic location. It is one of the biggest and most important hubs in the world for bunkering — that is, supplying ships with fuel.

But the latest oil spill highlights the risks of being a bustling port. The Singapore Strait is one of the busiest sea lanes in the world and remains vulnerable to oil spill accidents such as the June 14 incident. As Singapore strives to maintain its position in the industry by becoming a leader in green bunkering, the transition could expose the city to further risks.

Green bunkering involves supplying ships with alternatives to fossil fuels, such methanol and ammonia. These substances come with far lower carbon emissions than the petroleum-derived fuel oil used by most marine vessels, but are highly toxic if spilled into the sea. A 2022 study led by the Environmental Defense Fund found that an ammonia spill could have more severe impacts on fish than an oil spill of comparable size, though it would not persist for as long in the environment.

The world’s first voyage using ammonia as a shipping fuel, conducted by Australian miner Fortescue Metals Group, departed from Singapore in May. The city carried out the first ship-to-containership methanol bunkering for Maersk last year. The government said last month it is ready to offer full-scale commercial operations for the bunkering of methanol as a marine fuel.

The commercial benefits to Singapore of being a green bunkering hub are obvious. Bunker sales of biofuel blends increased to 520,000 tonnes in 2023, more than triple the 140,000 tonnes in 2022. Total business spending by key maritime companies overseen by Singapore’s Maritime and Port Authority of Singapore hit more than S$4.8bn (US$3.5bn) in 2023, up from S$4.3bn one year earlier.

The International Maritime Organization, the UN’s maritime body, is set to introduce stricter emissions rules for the shipping industry — which accounts for 3 per cent of global carbon emissions annually — from 2027. Companies globally are testing the uses of methanol, ammonia and hydrogen to comply with some of these new rules.

Singapore is putting money behind the green push, too. The Maritime Singapore Decarbonisation Blueprint, launched in 2022, was established to support the development and commercialisation of new technologies, with $300mn committed to initiatives over the next decade.

The MPA is working with the industry and investment community to fund start-ups in this space, with some S$68mn raised for 116 start-ups as of the end of 2023. The MPA and the Singapore Maritime Institute gave S$19.3mn in funding to universities and research institutes in 2023 for maritime R&D in smart ship development and green tech.

However, trialling these new fuels — which also include green hydrogen — opens Singapore up to potentially more accidents, as well as lucrative business. It does not take many incidents such as June 14 to move public opinion on the matter. Studies on the effects of an ammonia or methane leak still are ongoing, but there are already concerns in the industry over their potential dangers to both humans and marine ecosystems. Singapore may hope the risk is worth the reward. (Mercedes Ruehl)

shareholder proposals

Shareholder interest in social issues climbs higher

This year’s shareholder meeting season is nearing its close, and some interesting trends are already visible in the data. Check out this chart using data from investor intelligence firm Georgeson, showing proposals voted on as of June 20 at companies in the Russell 3000 — an index designed to include the biggest 3,000 listed companies in the US.

The number of shareholder proposals related to social issues has continued to climb, with notable upticks in resolutions around artificial intelligence and health issues. In contrast, governance- and environment-related proposals have declined slightly, despite an increase in resolutions around biodiversity.

Meanwhile, there’s been a steep rise in proposals against the environmental, social and governance agenda, doubling so far this year from the same period of 2022.

But if we look at rates of support for these resolutions, we see a different story:

There’s much more support for governance-related proposals than for other categories, with environmental and social proposals suffering a steady decline in backing. This chimes with complaints from major asset managers about a rash of climate-related proposals that they consider inappropriately restrictive of company management.

Investors are clearly far more damning in their response to anti-ESG resolutions, which have had an average support rate of just 2.3 per cent so far this year. (Simon Mundy)

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