Shipping-specific ESG rating and reporting framework

Abstract

Strict regulatory requirements supporting environmental sustainability are consistently promoted for the shipping sector, including the IMO 2050 framework to reduce greenhouse gas implications by 50% and CO2 emissions by 70% compared to respective 2008 levels. These requirements bear critical implications for vital investment, financing, and operational decisions of shipping company management teams. Empirical evidence, furthermore, indicates growing investor preferences in favor of companies promoting ESG (environmental, social, governance) good practices. This study develops an innovative methodology to construct an integrated ESG Index tailormade to shipping idiosyncrasies. The ESG Index offers support to shipping company sustainable policies, standardizes and facilitates materially the ESG reporting process, and promotes the comparative evaluation of ESG rating between companies as well as market segments. ESG reporting and rating are constructed in a robust dynamic framework to deliver useful feedback to shipping company sustainability prospects, promoting informed managerial, stakeholder, financier, and regulatory decisions.