The Shipping Industry’s Emissions Problem and OCEN’s Solution
The emissions from container ships are significant, making up as much as the aviation industry and if converted into the equivalent emissions of a country, shipping would be sixth globally, reports Vox. With demand only set to continue in the coming years, the potential contributions to global warming will grow as well. Unless changes are made.
Shipping containers burn some of the cheapest and dirtiest fuel, called bunker fuel or heavy fuel oil, a sludge so thick that it must be heated to 104 degrees Fahrenheit simply to become viscous enough to flow through pipes and be pumped. The exhaust is packed with noxious and dangerous fumes and chemicals. The International Council on Clean Transportation estimates that 60,000 premature deaths each year are directly caused by air pollution from international ships.
At the current estimates for the growth of the shipping industry, if emissions are left unchecked, those emissions would grow to be 130% of their 2008 levels by 2050, the International Maritime Organization found.
The largest hurdle for reducing emissions within the shipping industry largely comes down to cost, but it’s a challenge that many companies within the industry itself have taken upon themselves to meet and surpass. Companies such as Maersk have set their own internal deadlines ahead of IPCC recommendations for net zero by 2050, instead aiming for 2040 with a goal to reduce emissions per container by half by 2030.
“The US has key trade routes that drive its economic prosperity, all of which are vulnerable to disruption by climate regulations if the operators on these routes do not proactively approach this fuel transition,” reports the Ocean Conservancy.
Investing in the Shipping Industry Transition with OCEN
The IQ Clean Oceans ETF (OCEN) invests in the blue economy, which is estimated to be worth roughly $2.5 trillion annually and is anticipated to grow twice as fast as the mainstream economy by 2030.
OCEN seeks to track the IQ Candriam Clean Oceans Index, which offers exposure to companies involved in pollution reduction, carbon efficiency, clean energy, sustainable oceans, or cleaner shipping. These companies offer products or services that work to protect the oceans or promote cleaner oceans, use products or services that accomplish those goals, or else engage in activities that have ocean-related sustainability goals. Companies are not required to be primarily or directly engaged in these activities.
The index screens for ESG requirements in developed and emerging markets and applies an exclusionary screen monthly for companies that don’t comply with the UN Global Compact. The index includes companies of all market caps and utilizes a thematic score based on revenue and impact score to rank the companies it holds. Securities are weighted using a modified market cap-weighted methodology with a minimum weight of 0.25% and a maximum weight of 3% at its quarterly rebalances.
OCEN was developed in alignment with Oceana, the largest international advocacy organization to focus on ocean conservation. OCEN contributes a portion of its management profits to Oceana.
OCEN carries an expense ratio of 0.45% and currently has 80 holdings.
Source: ETF Trends