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1、 February 2024 Developments In Maritime Finance&Maritime Financial Centres Developments In Maritime Finance&Maritime Financial Centres _ _ 1 www.kbfc.or.kr/eng/Developments In Maritime Finance&Maritime Financial Centres Authors Simon Mills&Mike Wardle,Z/Yen Group February 2024 Z/Yen Group,2024 Devel

2、opments In Maritime Finance&Maritime Financial Centres _ _ 2 www.kbfc.or.kr/eng/Contents Foreword.3 Executive Summary.5 The Maritime Sector&Maritime Financial Centres.10 Introduction.10 Current Size And Shape Of Maritime Markets.11 The Modern Merchant Fleet.12 Freight Rates.14 Location Of Ship Build

3、ing Activity.16 Vessel Ownership.17 Registration.20 Maritime Finance.21 Purchasing And Refitting Vessels.21 Alternative Sources Of Finance.24 Other Segments Of The Maritime Finance Sector.28 Characteristics Of Maritime Financial Centres.30 Successful Maritime Centres.32 Connectivity.34 The Knowledge

4、 Economy.36 An Enabling Environment.38 2 Developments In Maritime Finance.42 Derivatives.42 Freight Derivatives.43 Fintech.45 ESG.50 Green Finance.54 3.New Challenges For Maritime Financial Centres.62 The Net Zero Transition.62 Direct Emissions.62 Fleet Composition.67 Information Technology.71 Block

5、chain.71 Artificial Intelligence.73 The Metaverse.74 4.Outlooks&New Opportunities For Maritime Financial Centres.75 Developments In Maritime Finance&Maritime Financial Centres _ _ 3 www.kbfc.or.kr/eng/Foreword In this era of rapid transformation,digitalization and the net-zero transition are present

6、ing both significant challenges and opportunities across all industrial sectors,including the financial industry.Advanced digital technologies such as AI,machine learning,and blockchain are not only enabling new financial models but are also contributing to considerable efficiency gains.Concurrently

7、,the sustainability transition is profoundly reshaping financial and business practices.This is evident in the adoption of the IFRS Sustainability Disclosure Standards and the EUs Corporate Sustainability Reporting Directive,compelling firms,including financial institutions,to rigorously assess clim

8、ate-related risks and measure their carbon footprints.The maritime finance centres are at the forefront of these changes.Technological advancements have catalysed new opportunities in the maritime industry.Fintech companies are leveraging the potential of blockchain technologies to fill the gaps cre

9、ated by the diminishing role of commercial banks.In the global maritime sector,there is intense competition to develop and commercialise AI-driven autonomous shipping.However,this advancement is countered by the challenges of sourcing sustainable fuels and maintaining eco-friendly fleets,which are i

10、mposing significant costs on maritime firms.The intersection of sustainability,digitalisation,and the unique characteristics of the maritime industry could lead to the rise and fall of various maritime financial centres,potentially leading to diverse exogenous changes.This phenomenon mirrors the his

11、torical shift of the maritime finance centre from Amsterdam to London in the 18th century,influenced by factors such as financial innovations,trade expansion,and geopolitical stability.Developments In Maritime Finance&Maritime Financial Centres _ _ 4 www.kbfc.or.kr/eng/At this critical juncture,this

12、 Z/Yen Groups report aptly addresses the impact of the net-zero transition and digital technology on the future of the maritime industry.It explores how these changes might influence the dynamic,competitive,and cooperative relationships between different finance centres.Readers will gain insights in

13、to the principles of maritime finance and understand the recent innovations and changes brought about by digitalization and sustainability.The report also provides concrete examples from various financial centres,including Busan,London,and Tokyo,offering a comprehensive view of the latest developmen

14、ts in maritime finance.I extend my heartfelt gratitude to the Right Honourable Lord Mayor of the City of London,Professor Michael Mainelli,for his profound concern for the future of the global maritime finance industry,which has been a primary motivation for this research project.Additionally,my sin

15、cere appreciation goes to Mike Wardle and Simon Mills for their unwavering dedication and efforts in completing this report.Myongho Rhee President,Busan Finance Center Developments In Maritime Finance&Maritime Financial Centres _ _ 5 www.kbfc.or.kr/eng/Executive Summary Maritime Centres The maritime

16、 sector is a critical,but hidden part of the global economy,as it facilitates up to 90%of global trade.Maritime financial centres the clusters of interlinked businesses,organisations,and agencies that coagulate around maritime activity are extremely important for national and regional economies and

17、can contribute significant fractions of GDP,driving growth and employment throughout the supply chain.Maritime Clusters Banks have become risk averse since the 2008 financial crisis and ship owners face significant challenges in financing new vessels.Global fleet size and composition changes as dema

18、nd shifts,and the need to fund these changing requirements has led to the development of alternative financing models which present a major opportunity for maritime finance centres,who,by specialising in maritime finance,can outcompete larger centres and draw in new business and investment.Developme

19、nts In Maritime Finance&Maritime Financial Centres _ _ 6 www.kbfc.or.kr/eng/However,with respect to competitiveness,past performance is no guarantee of future success.The development of effective supporting infrastructure-both physical and systemic-is crucial to maintain performance,as is communicat

20、ion and collaboration between government agencies,port authorities,academic institutions,and businesses.Connectivity the diversity of other centres that a maritime centre does business with,is also important as it enhances reputation and draws in more business.And finally,there is a great disruptive

21、 potential held by centres which embrace the(as yet unrealised)promise held by marine finance-focussed Fintech.Fundamentally,successful maritime centres are complex ecosystems and require careful management.Because of the complexities and dynamic nature of changes,the locus of maritime centres may c

22、ontinue to shift,indicating the ever-increasing tensions and cooperative opportunities among maritime finance centres.Developments In Maritime Finance Maritime derivatives are becoming an increasingly important product in maritime finance as they can be used to hedge against risk.Although the Baltic

23、 Exchange in London pioneered the development of this type of product,other centres are developing their own markets,with Forward Freight Agreements emerging as a particularly important market segment.The maritime sector has been relatively slow to embrace developments in Fintech,but the challenge o

24、f ship finance has created some notable emergent technologies,notably the tokenisation of marine assets which allows fractionised ownership and the spreading of risk for investors.ESG issues are significantly influencing outcomes in the maritime sectors and are becoming a major issue for both ship o

25、wners and port authorities.However,this has opened up new financing opportunities in green bonds,sustainability linked bonds and sustainability linked loans,which maritime financial centres can leverage to gain further advantage.Challenges For Maritime Financial Centres Maritime financial centres fa

26、ce significant risks with respect to decarbonisation and the sustainability transition-national and international policy and regulation is driving short term risks with respect to fleet valuations,with knock on effects on financing for fleet operators.Developments In Maritime Finance&Maritime Financ

27、ial Centres _ _ 7 www.kbfc.or.kr/eng/In the medium term,as pressure builds to retire older,less efficient ships,the lead time required for shipbuilding may result in a reduction in global fleet capacity that pushes up charter rates and increases volatility in futures markets.Blockchain applications

28、hold significant promise for streamlining the maritime sector and creating significant efficiencies and cost savings,though the sector has proved resistant to digitalisation,possibly because of the current importance of intermediaries.This area holds significant opportunities for centres which innov

29、ate.Conversely,the sector has embraced automation and AI for portside operations,and fleet operators are embracing opportunities to enhance fuel efficiency and improve safety.International law has yet to catch up with the implications of fully autonomous vessels and,as increased automation increases

30、 the risk of hostile actors causing disruption and damage,cyber security remains a concern.Outlooks&New Opportunities For Maritime Financial Centres There are three key challenges which will determine the success of maritime financial centres over the next few decades:Embracing the challenge of fina

31、ncing the maritime industry whilst investment in docks and shoreside infrastructure has not been an issue for most maritime financial centres,ship owners are facing an increasingly tight fiscal environment,as banks and equity funds redirect capital to lower risk sectors.Maritime financial centres sh

32、ould consider working with stakeholders in the financial services sector to identify the obstacles and opportunities associated with developing new financial products for ship owners.Embracing the challenge of net zero Achieving International Maritime Organisation(IMO)net zero targets will have a se

33、ismic impact on the commercial shipping fleet over the next twenty years.This will send waves throughout the industry,affecting shipbuilding,technological development,insurance,the freight futures market,and finance.Maritime financial centres should collaborate to navigate an effective course throug

34、h this undertaking,whilst competing to find new products and services which will enhance their reputations and attract new business.Developments In Maritime Finance&Maritime Financial Centres _ _ 8 www.kbfc.or.kr/eng/Embracing technology advancements Maritime financial centres have been slow to adop

35、t developments in fintech.Many processes are still paper based and require the involvement of intermediaries for processing,adding to costs for both ship owners and clients.Digitisation holds significant promise to streamline processes and reduce costs,and new developments in blockchain technology h

36、old promise for both ship financing and freight handling.However,the international nature of the maritime sector means that the benefits of digitalisation cannot be monopolised a single maritime centre cannot effectively implement digital solutions(particularly with respect to freight handling)witho

37、ut the participation of its trading partners.Maritime financial centres should work together to develop commonly agreed standards in fintech and digitalisation which will allow the roll out of this technology globally.To maximise the opportunities presented by these challenges leading maritime finan

38、cial centres could collaborate and demonstrate leadership by:Leading multi-stakeholder groups to develop industry-wide strategies.Developing regulatory roadmaps.Raising awareness of key issues affecting the industry.Supporting the development of new financial instruments(such as SSLBs and Green loan

39、s)to assist the flow of finance into the sector.Encouraging the exchange of technical knowledge and collaborative research.Supporting the development of international standards and benchmarks.Contributing to international and national policy development.In conclusion our research has found that curr

40、ent leading maritime finance centres need to continue innovating to maintain their positions to help manage the continuing challenge of technological and sustainability related risks.Emerging financial centres with a strong maritime tradition,such as Busan Finance Center,hold significant potential f

41、or sectoral growth because of their advanced maritime technology and active pursuit of new financial instruments.Finally,while conducting this research,two key areas were identified that,while they did not fall within the remit of this report,may become significant issues in the medium to long term(

42、5 to 15 years).Developments In Maritime Finance&Maritime Financial Centres _ _ 9 www.kbfc.or.kr/eng/The first is the issue of fleet bifurcation-The US and Europe have,over the last decade,made increasing use of sanctions as a means of projecting foreign policy.These sanctions cover a range of tradin

43、g nations(particularly Russia and Iran)and affect vessels docking at ports,making inter-ship transfers,or carrying goods from affected countries.Vessels breaking these sanctions violate the terms of their insurance and are unable to dock at European or US ports.However,a“grey fleet”is emerging,which

44、,although primarily involving older,smaller vessels may be as large as 18%of the global fleet.These vessels flout IMO regulations by disabling their automatic identification systems,employing location-hiding technologies,and engaging in location falsification to break sanctions.Analysis of the impli

45、cations of this trend and recommendations on how to counter it may be a useful area for further investigation.The second is the issue of carbon efficiency-There has been a great deal of attention paid to the carbon emissions of the global merchant fleet.However,the geographical location of certain f

46、orms of manufacturing industry(near natural and manufactured resources or drawing on low carbon energy sources)may result in carbon efficiency savings that outweigh the carbon emissions of sea transportation.Although this flies in the face of the trend for deglobalisation,further research could exam

47、ine whether there is a carbon accounting case to be made for maritime finance beyond scope 1 and 2 emissions.Developments In Maritime Finance&Maritime Financial Centres _ _ 10 www.kbfc.or.kr/eng/The Maritime Sector&Maritime Financial Centres Introduction The maritime sector forms the backbone of glo

48、bal trade,facilitating between 80%and 90%of global commodity trade1(by volume)and contributing around USD 380 billion a year via freight rates alone,to the global economy(see figure 1).Every year the shipping industry transports nearly 2 billion tons of crude oil,1 billion tons of iron ore(the raw m

49、aterial needed to create steel),and 350 million tons of grain2.When additional segments are added,such as the construction and maintenance of ships,passenger and leisure transport,the use of ports and terminals,and financial services,including financing,insurance,and broking,the sector is worth more

50、 than USD 14 trillion3 to the global economy,and shipping and ports link global value chains and underpin global economic interconnectedness.As a result,ports are global strategic assets which have evolved to become complex,multifunctional centres,creating a cluster effect(the concentration of compl

51、ementary industries in a specific location which synergises their strengths and influences governmental,academic,and regulatory services),which acts as a critical driver of social and economic progress in cities,regions,and countries worldwide.Most of the worlds financial capitals,such as London,New

52、 York,Shanghai,Frankfurt,Singapore,and Busan,grew from the exchanges that were nurtured by the international connections associated with the maritime sector.1 OECD(accessed 1 10 23)Ocean Shipping And Shipbuilding https:/www.oecd.org/ocean/topics/ocean-shipping/2 UNCTAD 2023 Review Of Maritime Transp

53、ort 2023 https:/unctad.org/publication/review-maritime-transport-2023 3 International Chamber Of Shipping(accessed 1 November 2023)Shipping And World Trade:Driving Prosperity https:/www.ics-shipping.org/shipping-fact/shipping-and-world-trade-driving-prosperity/Developments In Maritime Finance&Mariti

54、me Financial Centres _ _ 11 www.kbfc.or.kr/eng/Figure 1|Maritime Transport Goods Loaded World-Wide(Billions Of Tonnes)Current Size And Shape Of Maritime Markets The locus of maritime trade has,in a well-documented phenomenon named“The Westline”4,gradually drifted westward over the last 5,000 years,a

55、lthough the causes of this drift remain a matter of speculation(see figure 2).Figure 2|The Westline Adapted From Stopford 2008 4 Stopford,M 2008 Maritime Economics 3rd Edition,Routledge ISBN-13.978-0415275583 024681012200720082009201020112012201320142015201620172018201920202021Financial Crisis Covid

56、-19 Developments In Maritime Finance&Maritime Financial Centres _ _ 12 www.kbfc.or.kr/eng/By the 1990s,four-fifths(81%)of ship traffic was conducted in the northern hemisphere and today more than 60%of the traffic is in the Indian and Pacific Oceans5.Although the locus of trade has moved,in the late

57、 twentieth and twenty-first centuries the maritime finance sector has displayed both inertia and diffusion,as Athens,London,Amsterdam,New York,Singapore,and Busan remain important centres for the provision of capital for the construction of vessels,as well as brokerage,arbitration and insurance.In p

58、art,this is because maritime finance encompasses a diverse range of financial instruments,activities,and services that support the construction,acquisition,operation,and maintenance of vessels;and in part it is because the maritime sector by its very nature involves operating across regulatory bound

59、aries,and maritime finance follows the nexus of trade.The Modern Merchant Fleet Commercial ship sizes vary enormously-dry bulk carriers can start at 20,000 dead weight tonnes(dwt)for a Handysize carrier to over 220,000 dwt for a very large ore carrier(also known as Capesize,as this class of vessel c

60、annot fit through the Panama Canal and must travel around the Cape of Good Hope and Cape Horn).Tankers and container vessels vary likewise-with the latter being measured in TEU(Twenty-foot Equivalent Units the size of a standard shipping container).Tanker size ranges from general purpose,refined pro

61、duct tankers of around 10,000 dwt to ultra large crude carriers of over 500,000 dwt,and container vessel run from 1,000 to 20,000 TEU.Build costs vary according to the size of the vessel-a small container ship can cost around USD 30 million,while a bulk carrier can cost more than USD 50 million.Swis

62、s-based private shipping firm MSC took delivery of the Ultra Large Container Vessel,the MSC Tessa,in March 5 Demirel,E.2019 World Economy,Seaborne Trade And Posture Of Maritime Sector In The Next Decade International Social Sciences Studies Journal,5(46):5389-5407 Developments In Maritime Finance&Ma

63、ritime Financial Centres _ _ 13 www.kbfc.or.kr/eng/2023,built at the Changxing Shipbuilding Base in Shanghai.This vessel is part of a four-ship leasing deal which is estimated to have cost more than USD 600 million6.Figure 3|Total Size Of World Merchant Fleet(All Vessels)Source:UNCTAD Demand for new

64、 hulls is determined by the age of the existing fleet(with ships typically having a lifespan of 25 years),combined with other issues,such as the economic and policy environments,fuel costs,freight rates,new-building and second-hand prices,and demolition prices7.Figure 4 illustrates how the costs of

65、new and second-hand vessels have changed over the last fifteen years,with significant price increases after the 2020 pandemic.In part this illustrates 6 Interesting Engineering Worlds Largest Container Ship MSC Tessa Delivered,Made In China https:/ 7 Knapp,S.,Kumar,S.N.,&Remijn,A.B.(2008),Econometri

66、c analysis of the ship demolition market,Marine Policy,32(6),1023-1036 Developments In Maritime Finance&Maritime Financial Centres _ _ 14 www.kbfc.or.kr/eng/a rise in ship building costs driven by increased raw material and labour costs,but it is also a good demonstration of how the post-pandemic ri

67、se in demand for freight(combined with a shortage of hulls)inflated second hand ship prices.Figure 4|Hull Costs Source:Clarksons Freight Rates High freight rates are essential for ship owners to turn a profit,service debts,and purchase new vessels.At a broad level freight rates reflect:Customer dema

68、nd this is affected by the global economy.The availability of shipping this is a factor of the total size of the merchant fleet.Fuel costs A Panamax container vessel can carry around 8,000 Tonnes of bunker fuel and sailing at between 20 and 25 knots will consume about 225 tons of bunker fuel per day

69、8.Fuel prices can vary between ports(see figure 5).8 Notteboom,T.and P.Carriou(2009)Fuel surcharge practices of container shipping lines:Is it about cost recovery or revenue making?Proceedings of the 2009 International Association of Maritime Economists(IAME)Conference,June,Copenhagen,Denmark.Develo

70、pments In Maritime Finance&Maritime Financial Centres _ _ 15 www.kbfc.or.kr/eng/The cost of servicing debt interest on ship mortgages reflects the base rates of the jurisdiction in which the finance was raised.Port service charges and terminal fees-Depending on the destination,these may include frei

71、ght duties,pilotage,berth,canal,anchorage,lighthouse,and sanitation fees,customs duties,tugboat,and dock fees.Figure 5|World Bunker Prices 13/11/23(prices in USD/Tonne)Source:https:/ Between mid-2020 and early 2023 other factors,such as the global economy rebounding after the pandemic,a global short

72、age of shipping containers,and interruptions to major shipping routes served to push shipping rates to record highs(see figure 6)Figure 6|Global Freight Rates June 2020-June 2021 Source:9 9 Czarnikow(accessed 12 Nov 2023)High Freight Rates Until 2023?https:/ Developments In Maritime Finance&Maritime

73、 Financial Centres _ _ 16 www.kbfc.or.kr/eng/However,by the start of 2023,freight rates began to soften as global demand declined and shipping routes cleared,and commentators10 are predicting turbulent times for freight markets over the next couple of years as global economic forecasts continue to d

74、arken.Location Of Ship Building Activity The Peoples Republic of Chinas(China)is currently the worlds largest shipbuilding economy,representing 47%of all compensated gross tonnes(CGT)delivered worldwide in 2022,closely followed by South Korea,accounting for about 38%11(with a significant fraction of

75、 this taking place at Dae Sun Shipbuilding Engineering and STX Offshore&Shipbuilding in Busan12).Japan came in third at 17%13.According to Clarksons,ordering in 2022 was dominated by LNG carriers(a record 182 vessels,36%CGT),container vessels(350 vessels,29%CGT:down 50%on 2021 but still the third la

76、rgest on record)and car carriers(69 vessels,2.4%CGT).The increase in LNG carriers is a direct result of the war in Ukraine.Figure 7 Illustrates the global distribution of ship building activity for the last decade.Figure 7|Global distribution of shipbuilding Capacity 2013-2026 Source:Statista 10 The

77、 Loadstar(accessed 12 November 2023)Gloomy outlook for container shipping and not just for 2024 https:/ OECD 2023 Council Working Party On Shipbuilding C/WP6(2023)3/FINAL https:/one.oecd.org/document/C/WP6(2023)3/FINAL/en/pdf 12 OECD 2015 Peer Review Of The Korean Shipbuilding Industry And Related G

78、overnment Policies https:/www.oecd.org/sti/ind/peerreviewofthekoreanshipbuildingindustryandrelatedgovernmentpolicies.htm 13 Clarksons(accessed 4 November 2023)https:/ In Maritime Finance&Maritime Financial Centres _ _ 17 www.kbfc.or.kr/eng/Vessel Ownership Between January 2021 and January 2022,the w

79、orlds commercial fleet grew by 63 million dwt,to reach 2.2 billion dwt14.The geographical distribution of the beneficial ownership of vessels is illustrated in figure 8.Figure 8|Beneficial Ownership By Region Source:UNCTAD Handbook Of Statistics 2023 14 EMASoH 2023 Information Bulletin EMASoH April

80、https:/ In Maritime Finance&Maritime Financial Centres _ _ 18 www.kbfc.or.kr/eng/Details of the ten largest merchant vessel companies are contained in table 1.Table 1|The Ten Largest Shipping Companies Company Headquarters Details Mediterranean Shipping Company S.A.(MSC)Geneva,Switzerland MSC was fo

81、unded in 1970 in Italy.It is a privately owned company and has a fleet of over 500 container vessels that offer a capacity of over 4 million TEU.MSC operates out of 500 ports on 200 trade routes and employs over 70,000.AP Moller-Maersk Group Copenhagen,Denmark This Danish company has been in operati

82、on since 1904.They are the largest vessel and container ship operation in the world,and have several subsidiaries providing transport and logistics operations CMA CGM Group Marseille,France Founded in 1978 the CMA CGM Group offers a variety of services including vessel and container fleet management

83、,cargo cruises,logistics,and freight delivery.Employing 110,000 people,it operates through 160 companies,755 agencies and 750 warehouses China Cosco Group Shanghai,China Founded in 1961 Cosco is a government-owned shipping and logistics company,which owns several subsidiaries including OOCL,New Gold

84、en Sea,and Shanghai Pan Asian Shipping.It operates more than 10,000 ships and 360 dry bulk vessels and employs over 130,000 people.Hapag-Lloyd Hamburg,Germany Founded in 1970,Hapag-Lloyd stops at 600 ports in 130 countries.Employing around 14,000,its fleet has a capacity of 1,801,738 TEU and offers

85、118 liner services worldwide.Evergreen Marine Corporation Taipei City,Taiwan Founded in 1968,Evergreen employs over 10,000 and has a fleet of over 200 container ships with a capacity of 1,668,555 total TEU that travel to 240 global ports.ONE(Ocean Network Express)Singapore ONE began trading in 2018

86、and is a joint venture between K-Line,Nippon Yusen Kaisha,and Mitsui OSK Line.It employs around 14,000 people and its fleet has a capacity of 1,534,426 TEU.Hyundai Merchant Marine Seoul,South Korea Established in 1976,Hyundai Merchant Marine specializes in refrigerated and dry cargo,employing around

87、 5000 people and operating a fleet of over 160 vessels with a capacity of 816,365 TEU.Yang Ming Marine Transport Corporation Keelung City,Taiwan Founded in 1972 the Yang Ming Marine Transport Corporation employs 10,000 has a fleet with a capacity of 7.74 million dwt and 705,614 TEU,which serves over

88、 70 countries at 170 ports.Zim Integrated Shipping Services Haifa,Israel Zim employs around 4,500 and operates a fleet of over 90 vessels,with a total capacity of approximately 700,000 TEUs serving more than 180 ports in 100 countries Developments In Maritime Finance&Maritime Financial Centres _ _ 1

89、9 www.kbfc.or.kr/eng/It is notable that Greek shipping firms are not included in table 1.Greek shipowners control more than one-fifth of the worlds entire merchant fleet15(5,514 vessels,or 21%of the global fleet in deadweight ton(dwt)terms),and the total capacity of the Greek-owned fleet has grown b

90、y 7.4%since the COVID-19 pandemic.The Greek-owned fleet represents 59%of the European Union(EU)-controlled fleet.Most Greek shipping companies are family-owned businesses which have been in shipping for many decades(some for over a century).Most have small fleets of under five vessels.These companie

91、s have survived and prospered,have repaid all their loans,and have very good credit ratings within the Greek shipping industry16.Figure 9|Beneficial Ownership of Vessels By Country Source:Statista 15 Union of Greek Shipowners 2022 Annual Report 2021-22 https:/www.ugs.gr/media/13738/annual-report-21-

92、22.pdf 16 Gratsos G 2014 Greek Shipping And The Maritime Economy https:/www.eesc.europa.eu/sites/default/files/resources/docs/gratsos.pdf Developments In Maritime Finance&Maritime Financial Centres _ _ 20 www.kbfc.or.kr/eng/Registration International law requires that merchant ships are registered i

93、n a host country.However,many commercial ships are registered under flags that dont match the nationality of the vessel owner.Liberia,Panama,and the Marshall Islands(three countries with a combined population of less than ten million people)have registered nearly half of the worlds merchant vessels1

94、7.At the beginning of 2022,49%of all ships owned by Japanese entities were registered in Panama;25%of Greek-owned vessels were registered in Liberia and 23%in the Marshall Islands18.Flying a flag of convenience regards the registration of a ship in a different state to that of the ships owners.Vesse

95、ls registered under flags of convenience can cut operating costs and avoid regulations and taxes.Nations with open registries often make it easier to register a foreign owned vessel,some even allow companies to register vessels online19.The top five flag states with the largest number of registered

96、vessels are Panama,Liberia,The Marshall Islands,Hong Kong,and Singapore.These five nations control 77%of the total number of vessels registered under flags of convenience.17 Dickinson M 2023 Tackle Flags of Convenience and protect domestic shipping https:/www.nautilusint.org/en/news-insight/news/tac

97、kle-flags-of-convenience-and-protect-domestic-shipping/#:text=Liberia%2C%20Panama%20and%20the%20Marshall,flags%20favoured%20by%20P%26O%20Ferries.18 Safety4sea 2019 Why do ships choose flags of convenience?https:/ DieselS(Accessed 20 December 2023)Ship registration and Flag of Convenience System http

98、s:/ In Maritime Finance&Maritime Financial Centres _ _ 21 www.kbfc.or.kr/eng/Figure 10|Ships Registered Under Flags of Convenience States Source:Statista Maritime Finance Maritime finance is an umbrella term used to refer to the financial services associated with the commercial marine industry.This

99、includes the purchase or lease of vessels(either new or second-hand),the refitting of ships,the hiring of vessels to transport goods,marine insurance,and all associated legal services.Purchasing And Refitting Vessels Acquiring a vessel is a capital-intensive endeavour,requiring significant financial

100、 investment.Ship financing typically involves a mix of equity and debt.Equity financing involves investors contributing capital to acquire ownership stakes in vessels,while debt financing involves loans secured by the vessels themselves.Shipowners carefully balance these two components to optimise t

101、heir capital structure.Developments In Maritime Finance&Maritime Financial Centres _ _ 22 www.kbfc.or.kr/eng/Shipping finance transactions are a form of asset finance,and generally involves a lender providing funding to a borrower for the purchase of a vessel-either a brand-new vessel,built under co

102、ntract with a shipyard,or an existing second-hand vessel,which may have to undergo a refit.A borrower may also be seeking to refinance an existing debt on more favourable terms.Todays ship mortgages originate from the ancient practice of bottomry20,which was when a shipowner,to borrow money,had to p

103、ledge his ship as security for the loan.The lender was entitled to take possession of the vessel,and sell it,if the borrower was in default.A simplified debt financing arrangement is illustrated in figure 10.Typically,a lender will take collateral on a loan in the form of mortgage and may seek initi

104、al deposit on between 10 and 40%of the loan value(the size of the deposit will depend on the perceived risk of the loan and the length of the relationship the lender has had with the borrower).Due to the considerable size of finances required to purchase ships,shipping loans have traditionally been

105、arranged as syndicated loans.Syndicated loans are where a group of financial institutions collaborate to offer ship owners loans whilst spreading risk and allowing individual members of the syndicate take part in financial opportunities that may be too large for their individual capital base.Syndica

106、ted loans are becoming increasingly popular in Asian markets.European and American banks have yet to catch up,however BIMCO(The worlds largest direct-membership organisation for shipowners,charterers,shipbrokers,and agents.)has developed a standard term sheet21 for syndicated ship financing allowing

107、 ship owners to more easily comparisons between loan offers.Currently,more than 60%of shipping finance consistently comprises syndicated loans22 The maritime sector is heavily exposed to market volatility.Changes in freight rates(a function of demand in the global economy,the number of vessels avail

108、able for hire,and port capacity)as well as factors such as fuel costs and regulatory changes can all impact on profitability,which is why fleet owners tend to diversify their portfolio of vessels.20 https:/legal- 21 https:/www.bimco.org/contracts-and-clauses/bimco-contracts/shipterm-s 22 Lee,K.R.and

109、 Pak,M.S.,2018.Multi-criteria analysis of decision-making by international commercial banks for providing shipping loans.Maritime Policy&Management,45(7),pp.850-862.Developments In Maritime Finance&Maritime Financial Centres _ _ 23 www.kbfc.or.kr/eng/The aftermath of the 2008 financial crisis saw an

110、 exodus of banks from the maritime finance sector,a trend that continued within both European and US markets until early 2021(although European banks still hold a 49%share of the global market,and Asian and Australian banks share has increased to 44%).Figure 11|A Simplified Ship Financing Model Rapi

111、dly expanding demand,post-pandemic,saw ship owners profits rising rapidly,and as a result debt funds,and lessors have“showered”shipowners with relatively inexpensive capital over the past 24 months23.However,in 2022 the top 40 banks total lending to shipping was USD 289.39 billion,a fall on the 2021

112、 level of USD 290.12 billion24.23 Hellenic Shipping News 2023 Changing seas of ship finance https:/ 24 Petropoulos P 2023 Key Developments and Growth in Global Ship Finance Petrofin Research Developments In Maritime Finance&Maritime Financial Centres _ _ 24 www.kbfc.or.kr/eng/Figure 12|The Top 40 Gl

113、obal Ship Finance Banks Ranked(USD billion)Source:Petrofin Alternative Sources Of Finance In the years since the global financial crisis,maritime finance has seen significant changes.As banks have scaled back exposure or withdrawn completely from ship finance,traditional financing has been replaced

114、by convertible debt,private equity,bonds,and sale-and-leaseback arrangements.This trend has increased over the past year caused by,in part,the volatility in the sector because of the COVID-19 pandemic,and certain banks,most notably many European banks,exiting the sector and selling their shipping po

115、rtfolios or not taking on new business while existing loans are paid off.Equity Equity finance comes in four varieties for the shipping industry-owner equity,private equity,limited partnerships,and public offerings.Owner Equity-Most shipping companies finance a part of their investments with equity

116、that comes from retained earnings or the owners private recourses.Private Equity-There are several ways in which private equity funds can make investments within the shipping sector,including entering into joint ventures with ship owners,taking direct ownership stakes in vessels,acting as mezzanine

117、lenders,Developments In Maritime Finance&Maritime Financial Centres _ _ 25 www.kbfc.or.kr/eng/or purchasing existing debt from banks.Despite a buoyant market,in the last eighteen months,institutional investors have been moving money out of shipping and into less risky investments,driven by the rise

118、in base rates which has made equity positions in shipping assets less appealing.Significant players in the sector include J.P.Morgan Asset Management(JPM),Oaktree Capital Management,Carlyle Group,Blackstone Group LP,Apollo Global Management LLC,and WL Ross&Co.LLC.Limited partnerships see One-Ship KG

119、s and JOLCOs(below).Public offering-A public offering takes the form of flotation on one of the worlds stock exchanges.London,New York,Oslo,Singapore,Hong Kong,and Stockholm all have stock exchanges used by the shipping industry,with Oslo being particularly favoured,hosting around 40 maritime compan

120、ies with a combined market capitalisation of close to USD 20 billion25.However,raising equity through public offering has a mixed history due to the high volatility of the shipping market.One-Ship KGs An early experiment in alternative funding can be seen in the ill-fated German one ship KG financin

121、g model.In 2004,the establishment of single ship Kommanditgesellschaften,or limited partnerships,combined with a favourable tax regime,saw a flood of private investors pour into this market26.The hallmark of this model is that investors can gain benefits from both shipping performance and flat tax r

122、ates.Since taxes are levied according to shipping capacities and not the actual generated revenues,investors can expect positive returns from their shipping investments.25 Nor S(accessed 08 November 2023)Oslo tops chart for shipping listings https:/nor- Kravets&Kravets(accessed 08 11 2023)The rise a

123、nd fall of the German one ship KG financing model https:/www.kravets.de/kk-report/2014/10/14/rise-and-fall-of-one-ship-kg-financing-in-germany#:text=2007)%2C%2026%25%20of%20global,been%20removed%20from%20the%20market.Developments In Maritime Finance&Maritime Financial Centres _ _ 26 www.kbfc.or.kr/e

124、ng/Figure 13|The In One Ship KG and Surrounding Management Company,Banks And Investors Source:Kravets.de Initially,the high charter rate saw significant profits,and in 2007,26%of global order book tonnage came from German one ship KGs.However,the financial crisis saw the bottom drop out of demand in

125、 the shipping sector,a significant number of investors had their fingers burned,and today that figure is less than 2%.JOLCOs Widely used in the aviation sector,the Japanese Operating Lease with Call Option or JOLCO has become an increasingly popular source of financing in shipping over recent years.

126、JOLCO finance is a sale and leaseback arrangement that benefits from the tax advantages available to Japanese investors that allow the ship owner to reduce the cost of financing.The JOLCO models advantage lies in the special depreciation allowance permitted by the Japanese government for asset lesso

127、rs.This allows for accelerated depreciation of assets such as ships,resulting in significant tax benefits for the lessors.These benefits can indirectly favour ship owners or operators,as they often translate into reduced leasing costs.Developments In Maritime Finance&Maritime Financial Centres _ _ 2

128、7 www.kbfc.or.kr/eng/Figure 14|An example of Japanese Operating Leases Source:Busan Finance Center As banks become more regulated and risk averse,ship owners are seeking alternative structures that give them cash liquidity,flexibility and returns.The fundamental structure of a leasing arrangement is

129、 for a ship owner to give a lessee full possession and operational control of the ship for an agreed period in return for an agreed rent/hire charge.The most common types of leasing structures are the operating lease,and the finance lease.Operating leases or full-service leases are used for short to

130、 mid-term charter of the ship(for a single voyage or a series of voyages)and at the end of the term,the ship is returned to the owner.Operating leases can be terminated by the lessee at short notice,with minimal compensation to the lessor.Finance leases are used for the long-term finance of ships,wi

131、th the lessor acting as the de facto financier.The lessor is not involved in the operation of the ship(other than owning it)and the lessee enjoys the benefits(and the risks)of ownership of a vessel without the up-front capital costs.Finance leases contain a clause meaning the lessee cannot in any ci

132、rcumstances terminate the lease or be excused from paying hire.If the lease is terminated early,the lessee must compensate the lessor.Sale and leaseback arrangements can be used by shipping firms seeking to increase liquidity or reduce their exposure to volatility in shipping markets.Key players in

133、the leasing market include First Ship Lease Trust(Singapore),Global Ship Lease(London),IFCHOR Galbraiths Developments In Maritime Finance&Maritime Financial Centres _ _ 28 www.kbfc.or.kr/eng/(London),CMB Financial Leasing(Shanghai),ICBC Leasing(Beijing),Bank of Communication Financial Leasing(Shangh

134、ai),Hamburg Commercial Bank(Hamburg),Minsheng Financial Leasing(Tianjin),Maersk(Copenhagen),and CCB Financial Leasing(Beijing).Bonds The Norwegian bond market is seen as particularly favourable for shipping assets,with significant offerings of green bonds.Decarbonisation of fleets is seen by ship ow

135、ners as a priority as the International Maritime Organisation(IMO)has set a target reduction of 50%in greenhouse gas emissions from the maritime sector by 2050(see page 33).The sector currently accounts for around 2.9%of global emissions.Other Segments Of The Maritime Finance Sector Shipbroking-Ship

136、brokers are specialist intermediaries/negotiators between ship owners and customers who wish to charter ships to transport cargo,as well as between buyers and sellers of vessels.The shipbroking Market size was valued at USD 1.34 billion in 2021 and is projected to reach USD 1.73 billion by 203027.Th

137、is significant growth is being driven by the adoption of new technologies such as artificial intelligence,machine learning,blockchain and Augmented Reality(see page 45).The key global centres for shipbroking are London,New York City,Singapore,and Tokyo,though all maritime centres have some shipbroki

138、ng expertise.Insurance-Insurance and ship finance are closely connected as a ship financier will wish to minimise credit risk by having a vessel as collateral security for the loan.This vessel will need to be adequately insured to serve as sufficient security.As a result,marine insurance is a large

139、and profitable sector.The global marine transport insurance market collected premiums more than USD 35 billion in 2022,an increase of 8.3%over the previous year28.European insurers held the bulk of the market share(see figure 14),lifted by a combination of increased global trade volumes,a stronger U

140、S dollar,increased offshore activity and higher vessel values.27 Technavio 2023 Shipbroking Market by Application,End-user,and Geography-Forecast and Analysis 2023-2027 https:/ 28 IUMI 2022 Analysis of the global marine insurance market https:/ Developments In Maritime Finance&Maritime Financial Cen

141、tres _ _ 29 www.kbfc.or.kr/eng/Figure 14|Regional Share Of Marine Insurance Source:IUMI Legal Services-Maritime policy and the laws that enforce it can be disaggregated into international,regional,and national policies.The United Nations Convention on the Law of the Sea(UNCLOS)is the international a

142、greement that provides the top level defining the rights and responsibilities of nations in their use of the worlds oceans,establishing guidelines for businesses,the environment,and the management of marine natural resources.Each region and nation has absorbed this into their own regulatory framewor

143、ks.Globally the maritime law sector is estimated to be worth more than USD 2 billion.Within the field of maritime law,there are 3 key service segments:Litigation&dispute resolution.Shipping Finance(including mergers&acquisitions).Contractual Work(including charters&insurance).The United Kingdom is t

144、he largest centre for maritime law globally(with around a 25%share of the value of the global market).The UKs strength in this sector is partly due to long-Developments In Maritime Finance&Maritime Financial Centres _ _ 30 www.kbfc.or.kr/eng/established legal infrastructure such as Admiralty and Com

145、mercial Court judges,but mainly due to the ubiquitous use of English law in the maritime sector29.Characteristics Of Maritime Financial Centres Menon Economics and DNV have produced a bi-annual annual report ranking maritime financial centres since 2019.The publication is highly influential and has

146、been credited with prompting China to promote Shenzhen,Shanghai,and other cities to build Global Maritime Capital in its 13th Five-Year Plan for Maritime Economic Development30.In addition,such analyses have paid close attention to emerging financial centres such as Busan for their advanced maritime

147、 technology and ecosystem developments.The index measures performance of maritime centres across five pillars Shipping Centres,Maritime Finance&Law,Maritime Technology,Ports&Logistics,and Attractiveness&Competitiveness.Details of the top 20 maritime centres are contained in table 2.For the last 16 y

148、ears,Z/Yen has published two Global Financial Centres Index reports a year which have charted the progress of the worlds leading financial centres.The GFCI provides profiles,ratings,and rankings for 111 financial centres,drawing on two separate sources of data 147 instrumental factors(external indic

149、es)and more than 9,000 responses to an online survey.Comparison between the latest GFCI report and the Menon Economic Index reveals that although there is some consistency in ranking between the two indices(see Figure 13),there are some notable disparities particularly for Oslo,Hamburg,Copenhagen,Bu

150、san,and Athens,which are ranked lower in the GFCI than the Maritime Centres Index substantially lower in the case of Athens.29 City Of London 2016 The UKs Global Maritime Professional Services:Contribution and Trends https:/www.cityoflondon.gov.uk/assets/Business/the-uks-global-maritime-professional

151、-services.pdf 30 Cheng Y et al.2023 The construction of Global Maritime Capital-Current development in China Marine Policy,Volume 151,May 2023 https:/ Developments In Maritime Finance&Maritime Financial Centres _ _ 31 www.kbfc.or.kr/eng/Table 2|The Top 20 Maritime Centres(Menon Economics and DNV)Dev

152、elopments In Maritime Finance&Maritime Financial Centres _ _ 32 www.kbfc.or.kr/eng/Figure 15|Comparison Between GFCI 34 And The Maritime Centres Index These disparities illustrate that,whilst the criteria for success for both financial services and maritime financial services are broadly similar(clu

153、stering of financial services,an enabling business environment,effective infrastructure,and readily available human capital),maritime finance remains a niche field where smaller,nimble centres have become specialised providers of high value-added services,such as maritime financial,legal,insurance,a

154、nd brokerage.These market segments which are critical to the functioning and performance of multinational firms local and global operations allow smaller financial centres to develop specialisms which dramatically increases their standing as maritime financial centres.Successful Maritime Centres Res

155、earch confirms that maritime centres contribute large amounts of value to national economies-in some cases a significant percentage of total GDP and employment31.The value and demand created in the maritime cluster results in investment in supply chains and increases in consumption,which creates fur

156、ther jobs and demand32.There is also some 31 DSA 2010 The Economic Significance of Maritime Clusters-Lessons Learned from European Empirical Research Working Paper The Danish Shipowners Association 32 Goodwin A 2016 The Economic Value Of Shipping And Maritime Activity In Europe Oxford Economics http

157、s:/www.oecd.org/sti/ind/Session%201_c%20-%20Andrew%20Goodwin%20-%20Presentation%20for%20Website.pdf Developments In Maritime Finance&Maritime Financial Centres _ _ 33 www.kbfc.or.kr/eng/evidence that nations with maritime centres have a higher GDP per capita than those which do not.Table 3|Global Ma

158、ritime Centres And Their Rankings In The GFCI Index Clustering is extremely important to maritime centres.Porter33 gives the following definition for clusters:“Clusters are geographic concentrations of interconnected companies,specialized suppliers,service providers,firms in related industries,and a

159、ssociated institutions(for example,universities,standard agencies,and trade associations)in particular fields that compete but also cooperate.”33 Porter,M.On Competition;Harvard Business School Press:Boston,MA,USA,1998 City GFCI Ranking Maritime Finance Developments London 1 Known for its rich histo

160、ry and prominence in maritime finance,London is a hub for shipping and insurance.The city is home to a multitude of shipping firms,brokerage houses,and the Baltic Exchange,a pivotal player in the shipping market.New York 2 As a pivotal maritime finance hub,New York excels in ship financing and marit

161、ime insurance.Its famed Wall Street and financial institutions provide substantial backing for maritime investments.Singapore 3 As a leading global maritime hub,Singapore has rapidly established itself as a central maritime finance city in Asia.It offers an extensive array of financial services to t

162、he maritime sector,including banking,insurance,and legal support.Hong Kong 4 Playing a key role in the Asia-Pacific region,Hong Kong is a major centre for maritime finance.It offers a variety of services like ship financing,maritime insurance,and a strong legal framework for maritime dealings.Shangh

163、ai 7 Emerging swiftly as a leading maritime finance centre,Shanghai is gaining prominence alongside the growth of Chinas shipping industry.Tokyo 20 Tokyo plays a vital role in maritime finance,closely linked to Japans shipping sector and known for its involvement in maritime financing models like JO

164、LCO.Busan 30 As home to one of the worlds busiest and most technologically advanced ports,it plays a crucial role in the shipping industry.Busans growth as a maritime finance centre is bolstered by South Koreas strong shipbuilding industry and its strategic position in international shipping routes.

165、Oslo 42 Renowned for its maritime heritage,Oslo is especially recognised for its contributions to shipping finance,insurance,and maritime technological innovations.Hamburg 49 Hamburg stands out as a crucial maritime centre in Europe,marked by its concentration of shipping companies and financial ins

166、titutions focused on ship finance.Developments In Maritime Finance&Maritime Financial Centres _ _ 34 www.kbfc.or.kr/eng/Clusters tend to have the following features in common:Physical proximity of sector participants.A shared focus and strong linkages between sector participants.Good information exc

167、hange between sector participants.Strong institutional infrastructure supporting the activities of the sector.A strong cultural identity and common values.In summary,strong local government,effective maritime associations,forward looking research institutions,and ongoing stakeholder engagement are a

168、ll essential to ensuring that centres remain attractive locations for maritime business34.Whilst it is a truism that maritime financial centres owe their success and continued existence to their historic status as regional ports and commercial hubs;a centres past success is no guarantee of continued

169、 relevance.Venice in Italy,Liverpool in England,and New Orleans in the United States all lost their status as maritime centres due to a combination of factors including war,lack of investment in infrastructure and changing technology(notably the development of railways in the case of New Orleans35).

170、Connectivity Todays successful maritime centres demonstrate high levels of connectivity with other locations,as they typically have a good physical information and communication infrastructure that facilitates the international transfer of goods,people,and information to national,regional,and intern

171、ational markets.Figures 14i-iii illustrate the connectivity of Singapore,Busan,and Sydney36.These diagrams are created from data collected in the 34th Global Financial Centres Index37,and illustrate that higher ranking centres have high levels of business connectivity with other financial centres,re

172、flecting the international nature of maritime finance.34 Robins D 2012 Clustering in the Marine Industry Channel Arc Manche Integrated Strategy Technical Report 35 Kaufman B 1973 New Orleans and the Panama Canal,1900-1914 Louisiana History:The Journal of the Louisiana Historical Association Vol.14,N

173、o.4(Autumn,)pp.333-346 36 Z/Yen 2023 GFCI 34 Connectivity Tool https:/ Z/Yen 2023 Global Financial Centres Index 34,Z/Yen Group https:/ In Maritime Finance&Maritime Financial Centres _ _ 35 www.kbfc.or.kr/eng/Figure 16i|Singapore Connectivity Chart Key Figure 16ii|Busan Connectivity Chart Developmen

174、ts In Maritime Finance&Maritime Financial Centres _ _ 36 www.kbfc.or.kr/eng/Figure 16iii|Sydney Connectivity Chart The Knowledge Economy A strong knowledge-based economy is also essential.Shipping requires very large amounts of capital investment,and the maritime sector faces several significant tec

175、hnical challenges around decarbonisation.The maritime sector was quick to embrace the advantages that information technology brought to the logistics sector notably the use of digital platforms for ship and cargo tracking,as well as the implementation of digital communication and collaboration tools

176、.Amongst the current advances in maritime technology are:Robotics technology and the internet of things has applications in port terminals,where automated cargo handling systems can contribute to fast and efficient operations,track shipments,lower risk of human errors and accidents,and,most importan

177、tly minimized waiting times at anchor or at the quay for ships.Big data and analytics can be used to forecast demand and optimize sailing routes to reduce fuel consumption.Space-based monitoring system can be used to provide real time data on weather conditions and vessel traffic.Developments In Mar

178、itime Finance&Maritime Financial Centres _ _ 37 www.kbfc.or.kr/eng/Artificial and Augmented Intelligence can be used to create smart ports and enhance efficiency,transparency,and sustainability,as well as potentially creating autonomous cargo vessels which could improve safety,reduce fuel consumptio

179、n,and optimise scheduling and routing to reduce delivery times.Figure 17|AI Driverless Trucks Transporting Cargo From Busan To Incheon Source:Mars Auto Knowledge-based industries tend to centralize in key city regions San Francisco for ICT;London for finance;and Busan for maritime technology.Univers

180、ities act as incubators for start-ups and exert a powerful clustering influence on industry38.It is no coincidence that all the worlds great cities are also renowned centres of learning.38Parilla J&Haskins G 2023 How research universities are evolving to strengthen regional economies:Case studies fr

181、om the Build Back Better Regional Challenge https:/www.brookings.edu/articles/how-research-universities-are-evolving-to-strengthen-regional-economies/Developments In Maritime Finance&Maritime Financial Centres _ _ 38 www.kbfc.or.kr/eng/Figure 18|The Korean Maritime&Ocean University Campus,Busan Sour

182、ce:KMOU An Enabling Environment A diverse collection of non-commercial organisations,including ship registries&classification societies,training bodies,trade associations,and governmental agencies,acts as both glue and catalyst to hold marine finance clusters together and allows them to nurture futu

183、re talent.These organisations allow firms to connect,build relationships and transfer knowledge,enhancing economic development and improving a centres competitiveness39.Amongst the agencies responsible for providing an enabling environment for marine finance clusters are:Classification Societies The

184、se are organisations which develop and apply technical standards for the design,construction,and survey of ships and which carry out surveys and inspections on board ships.The original role of classification societies was to supply information about the condition of ships for the insurance sector th

185、at wanted to reduce uncertainty and manage marine risk40.Today this role has extended to inspection and regulation.39 Porter J.2010 Best practices in local development.LEED Programme of the Organisation for Economic Co-operation and Development https:/www.oecd-ilibrary.org/urban-rural-and-regional-d

186、evelopment/best-practices-in-local-development_9789264193369-en#:text=This%20book%20identifies%20the%20strong,and%20actions%20that%20underpin%20restructuring 40 Furger F 1997 Accountability and systems of self-governance:The case of the maritime industry Law&Policy 445 University of Denver https:/ D

187、evelopments In Maritime Finance&Maritime Financial Centres _ _ 39 www.kbfc.or.kr/eng/Flag states can authorise classification societies to act on their behalf to carry out statutory survey and certification work of their ships.Worldwide there are more than 50 classification societies but only 11 are

188、 presently recognised by the European Union.This recognition allows them to act as recognised organisations on behalf of EU member States.Amongst them is the Korean Register,headquartered in Busan,which in 2022 classed more than 80 million gross tonnage of shipping41.Merchant Marine Colleges There a

189、re more than 350 merchant marine colleges around the world42 offering training for individuals seeking a career in merchant shipping.Some nations with a particularly strong maritime tradition have multiple colleges,the most prestigious of which are affiliated with universities and offer training bey

190、ond basic seamanship to encompass marine technology and engineering,financial services,insurance,and law.Trade Associations Effective trade association enhance connectivity and promote the exchange of ideas and talent.They also empower industry to lobby local and national government and promote the

191、industry nationally and internationally.Some trade associations are closely aligned with regulators and may be given“self-regulatory”status.A self-regulatory organization(SRO)is an entity such as a non-governmental organisation,which has the power to create and enforce stand-alone industry and profe

192、ssional regulations and standards.These standards may cover training,professional exams,registration,and professional development,and form a licence to operate for industry practitioners.For example,the Institute of Chartered Shipbrokers is the SRO for shipbroking in the United Kingdom and offers ac

193、creditation for shipbrokers43.41 Korean Register(accessed 14 November 2023)https:/www.krs.co.kr/eng/Content/CF_View.aspx?MRID=347&URID=85#42 https:/en.wikipedia.org/wiki/List_of_maritime_colleges 43 UK Government List of regulated professions(accessed 14 November 2023)https:/www.regulated-profession

194、s.service.gov.uk/Developments In Maritime Finance&Maritime Financial Centres _ _ 40 www.kbfc.or.kr/eng/Local,National and Regional Government Agencies-Port authorities are public or semi-public organisations which are responsible for the governance,management,and development of ports.They take respo

195、nsibility for:Governance Port Authorities are responsible for applying and enforcing regulations set by other policymakers.These regulations cover a broad swathe of areas including health and safety,labour laws,and environmental protection,and are handed down by both national administrators and inte

196、rnational organizations,such as the International Maritime Organisation.For specific regulations such as navigation,and law and order,they are assisted by the Harbour Master,dedicated police forces,customs and excise,and the coastguard.The way in which these regulations are applied and enforced can

197、impact on a ports competitiveness44 consultation with stakeholders and pragmatism in their application rather than short-notice enforcement by diktat,can do much to ease the burden of regulation on ports.Management Port Authorities commission,construct and maintain infrastructure,as well as leasing

198、or giving concessions on this infrastructure to private companies and ensuring the development and competitiveness of the port cluster.Revenue raised from leasing and concessions can be redirected into further investment in infrastructure and maintenance,although local and regional government may de

199、mand a proportion of the income.Inward Investment-Maintaining a port is a capital-intensive activity and the development of ports is largely driven by investment by multinational companies in industrial logistics45.Competition for this investment can be fierce and port authorities aim to provide the

200、 most competitive environment for this type of inward investment,often maintaining permanent regional representative offices abroad and participating in trade missions or trade fairs organized by either national or regional foreign trade offices or trade associations.For a port authority to effectiv

201、ely enhance the benefits 44 Notteboom T et al 2022 Port Economics,Management and Policy https:/porteconomicsmanagement.org/pemp/contents/part4/port-reform-and-governance/45 Wang J&Olivier D(2004).Port governance in China:A review of policies in an era of internationalizing port management practices.

202、Transport Policy,11,237250.https:/ideas.repec.org/a/eee/trapol/v11y2004i3p237-250.html#download Developments In Maritime Finance&Maritime Financial Centres _ _ 41 www.kbfc.or.kr/eng/of maritime cluster development,it should be self-sustaining,and have the autonomy to set prices and make investment d

203、ecisions.Legal infrastructure-Arbitration clauses are standard in most maritime contracts.Maritime arbitration is particularly suited to resolve international disputes,which usually involve multiple jurisdictions.Flexible procedures and accelerated decisions and enforcement,via the New York Conventi

204、on,make arbitration an attractive option compared to court proceedings.Historically,London and New York have been the traditional centres of maritime arbitration,however in recent years,organisations such as The Asia-Pacific Maritime Arbitration Center,based in Busan,have encouraged the maritime com

205、munity to use their venues for the resolution of maritime disputes.Figure 19|The Asia-Pacific Maritime Arbitration Center,Busan International Finance Center Source:Busan International Finance Centre Developments In Maritime Finance&Maritime Financial Centres _ _ 42 www.kbfc.or.kr/eng/2 Developments

206、In Maritime Finance The maritime sector is an industry characterised by capital intensiveness,highly price volatility,strong business cycles,seasonality,and cyclicality.In recent years,these extant risks have been joined by new challenges around the management of air pollution,climate change and env

207、ironmental,social and governance issues.Risk management is extremely important for both ship owners and their customers,who face high volatility in freight rates and vessel prices as well as in operating and capital costs.Which is why the maritime finance sector has developed a suite of tools to add

208、ress risk.Derivatives Derivatives are a type of financial contract,the value of which is dependent on an underlying asset group or class.Prices for derivatives are sensitive to fluctuations in the underlying asset and may be traded to hedge against risk.The four main types of derivative contracts ar

209、e options,futures,forwards,and swaps.Options are derivative contracts that give the buyer the right(but not the obligation)to buy or sell the underlying asset at a specified price at a certain time.The specified price is known as the strike price.Futures are standardised contracts that allow the hol

210、der to buy or sell an asset at an agreed price at the specified date.The parties to the contract are obligated to perform the contract.Both futures and options are traded on stock exchanges.The value of futures and options is adjusted according to market movements until their expiration date.Forward

211、s are similar to futures(the parties are obligated to perform the contract)however,forwards are not a standardised product and are and generally not traded on stock exchanges.Swaps are contracts where two parties exchange their financial obligations;swaps are primarily used to hedge against volatili

212、ty in interest rates.Swaps are not traded on Developments In Maritime Finance&Maritime Financial Centres _ _ 43 www.kbfc.or.kr/eng/stock exchanges and are over-the-counter contracts between businesses or financial institutions.Freight Derivatives Maritime derivatives have been developed specifically

213、 for protecting(hedging)against risks in shipping46,both for owners and those chartering cargo haulers.Freight derivatives are financial instruments whose value is derived from the future levels of freight rates,such as TEUs,dry bulk carrying rates and oil,LPG,or LNG tanker rates.Freight derivatives

214、 are used by end-users,ship owners,commodity exporters,and suppliers to hedge against price volatility in freight rates.Freight derivatives can include exchange-traded freight futures,swap futures,forward freight agreements(FFAs),and container freight swap agreements.Derivatives give companies the a

215、bility to manage risk as they provide a way to mitigate exposure to price fluctuations in shipping47.They are an important element of shipping markets,and,as with any derivative they can be bought or sold by hedge funds and retail traders allowing liquidity into the marketplace.Freight Futures-These

216、 derivatives are exchange traded contracts and are guaranteed by clearing houses,which act as counterparties and guarantee the underlying contracts.These are standardised products with respect to the underlying asset,maturity etc.Forward Freight Agreements These are Cash Settled Contracts for Differ

217、ence(CFD)bought and sold at an agreed rate per tonne or daily time-charter rate.An FFA fixes a price today for settlement against an agreed future period and the position settled against an index or assessment of spot market over the agreed future period.FFAs can be either an Over The Counter(OTC)or

218、 Exchange Cleared Contract and are tailored to meet the needs of the participants.For many years the Baltic Exchange in London was the world centre for freight derivatives trading.In addition,over the last decade other centres have drawn increasing traffic including 46 Kavussanos M.&Nomikos N 1999.T

219、he forward pricing function of the shipping freight futures market.Journal of Futures Markets 19,3,353-376.https:/ 47 Kavussanos M&Visvikis I 2006.Derivatives and risk management in shipping,1st Edition June 2006 Witherbys Publishing Limited&Seamanship International,ISBN 10:ISBN 1 85609 310 7 ISBN 1

220、3:ISBN 978 1 85609 310 1 Developments In Maritime Finance&Maritime Financial Centres _ _ 44 www.kbfc.or.kr/eng/the Cleartrade Exchange(CLTX)in Singapore and the Maritime Exchange Information Center(MEIC)in Busan.The MEIC,located in the Busan Finance Centre,was first designated as the Korean centre f

221、or promoting Marine derivative finance in 2012 when Busan City,Korea Exchange(KRX),and Busan Development Institute(BDI)signed a memorandum of understanding on developing shipping derivatives.Busan is one of the busiest ports in the world48 and the MEIC has grown significantly to become a leading reg

222、ional maritime finance information provider,helped by the development of local expertise through the development,by Korea Maritime and Ocean University and Pusan National University,of a masters degree program specializing in maritime finance and derivatives.The MEIC was later incorporated into the

223、Korean Ocean Business Corporation(KOBC)in 2018.Since its establishment,KOBC has been periodically publishing maritime market reports and developing freight indexes for containers departing from Busan port.Indexes including the KCCI(KOBC Container Composite Index)and KDCI(KOBC Dry Bulk Composite Inde

224、x)have become useful references for global maritime businesses,which primarily use Busan port for transportation.49 48 Baltic Exchange 2023 Xinhua-Baltic International Shipping Centre Development Index Report https:/ 49 Busan Port,in South Korea,one of the largest and busiest ports in the world,hand

225、les a significant volume of transshipment cargo.It has recorded the second-largest transhipment volumes in the world,following Shanghai Port Developments In Maritime Finance&Maritime Financial Centres _ _ 45 www.kbfc.or.kr/eng/Figure 20|KOBC Freight Indices Categorized By Ship Type Source:KOBC,2023

226、The derivatives market for tankers saw increased traded volumes in 2022.Tanker Forward Freight Agreement(FFA)volumes hit 734,972 lots,up 33%on 2021(tanker market volatility has largely been caused by Russias invasion of Ukraine).Whereas dry Forward Freight Agreement(FFA)volumes reached 2,218,249 lot

227、s,down 12%on 2021,reflecting strengthening headwinds for the global economy50.Fintech Financial technology(known as FinTech)is a term used to describe technology that improves and automates the delivery and use of financial services.FinTech uses specialised software and algorithms,accessed through c

228、omputers or smartphones,that enable end to end business to business(B2B)or business to customer(B2C)transactions,allowing streamlined processing that can access new markets,enhance outcomes,and reduce both costs and risk.50 Baltic Exchange 2023 Market Information https:/ In Maritime Finance&Maritime

229、 Financial Centres _ _ 46 www.kbfc.or.kr/eng/Following the 2008 global financial crisis,the introduction of capital adequacy requirements for maritime loans led to banks moving away from competitive lending,particularly for small and medium sized fleet operators51.Despite an explosion in the use of

230、FinTech in the financial services sector-McKinsey research shows that revenues in the FinTech industry are expected to grow almost three times faster than those in the traditional banking sector between 2023 and 202852-the maritime sector has been relatively slow to grasp the opportunities that this

231、 technology presents,but several platforms have sprung up over the last five years.51 Kalgora B&Christian M 2016 The Financial and Economic Crisis,Its Impacts on the Shipping Industry,Lessons to Learn:The Container-Ships Market Analysis Open Journal of Social Sciences,Vol.4 No.1,2016 https:/www.scir

232、p.org/journal/paperinformation.aspx?paperid=62786 52 McKinsey&Company 2023 Fintechs:A new paradigm of growth https:/ Developments In Maritime Finance&Maritime Financial Centres _ _ 47 www.kbfc.or.kr/eng/Currently,the main players in this field include ,oceanis.io and Infinity Maritime.All These plat

233、forms offer rapid assessment of loans,and high transparency and bring together both large and small borrowers and investors to streamline the ship financing process.FinTech platforms tend to suit smaller ship owners large shipping firms can find cheaper money through listing or bonds-but smaller pla

234、yers are facing an increasingly tight lending market-bank exposure to shipping is now at just 63%of where it stood in 2008,even though the world fleet is some 40%larger.For small companies(which make up the bulk of the global fleet)FinTech platforms can offer both speed and the potential to reach a

235、wider lender base.Further liquidity may be injected into the maritime finance using blockchain applications.The blockchain tokenisation of real-world assets can transform a marine asset into a digital asset which can be traded on public platforms,enabling fractional ownership,and enhancing access to

236、 marine finance markets.Decentralised,trustless transactions significantly reduce transaction costs,enhance price discovery,and hold the potential to revolutionise shipping finance.Currently S based in London is pioneering developments in this field and TMC Shipping has become the first company to t

237、okenise its assets on the Shipfinex ship financing platform53.Other players are now entering this potentially game-changing field.Recently,in collaboration with Korea Maritime&Ocean University,the Busan Finance Center published a research article which explored the creation of a blockchain-based STO

238、(Security Token Offering)platform that enables fractional ownership of vessels.Building on this,Korea Maritime&Ocean University has further collaborated with the fintech startup Buysell Standards Co.()for the commercialization of the STO platform.Buysell Standards Co.()is preparing a service to issu

239、e ship loan bonds and security interest trust beneficiary certificates via a blockchain-enabled platform.The aim is to create a private shipping finance market for small investors,targeting eco-friendly ships of small and medium size.The cost savings achieved through digitisation will allow the 53 L

240、epic B 2023 TMC Shipping teams with Shipfinex to tokenise assets https:/ In Maritime Finance&Maritime Financial Centres _ _ 48 www.kbfc.or.kr/eng/issuance of atypical securities and the securitization for financing these ships,which were previously difficult to finance through existing large financi

241、al companies.Figure 21|Buysell Standards Co.Shipping Finance STO Platform,Piece Source:Buysell Standards Co This field offers significant opportunities for the maritime finance sector but is not without problems.Financial services institutions operate within a framework of policy,regulation,and stan

242、dards(some imposed by governments,some by self-regulation)which can be termed financial systems.Although the financial services sector has pioneered the adoption of smart ledger solutions-in clearing and settlement,insurance,and regulatory compliance(particularly for anti-money laundering and know y

243、our customer applications),regulation,designed to protect consumers and institutions can act as a constraint on innovation.One way that financial centres have sought to encourage the growth of the Fintech sector is through the establishment of“sandboxes”-formal regulatory programs that allow busines

244、ses to test new financial services or business models with customers,subject to certain safeguards and oversight.For instance,the Busan International Finance Centre has hosted a vast number of blockchain startups based on the regulatory sandbox named the Blockchain Regulation-Free Zone.Since 2019,th

245、e South Korean government has designated Busan Metropolitan City as a blockchain regulation-free zone.By utilizing the sandbox program,numerous blockchain ventures have been able to commercialize innovative fintech businesses.Developments In Maritime Finance&Maritime Financial Centres _ _ 49 www.kbf

246、c.or.kr/eng/Figure 22|Sandbox Exemplar Busans Block Chain Regulation Free Zone Source:Busan Metropolitan City Although sandboxes seek to provide a controlled environment for testing,reduced time-to-market,consumer protection safeguards and better access to finance,there is a view that they can be an

247、ti-competitive,particularly as firms outside the sandbox funnel may be less likely to get regulatory approval.Regardless of whether financial centres choose to establish sandboxes,there are some useful,progressive regulatory interventions that can be made which can encourage open,competitive markets

248、.These include:providing open industry data test sets,e.g.,anti-money laundering,or consumer activity,that allow firms to test that their prototype systems can hand real,though anonymised,data.working on consistent standards for connecting firms together,more for inputs and output than processes.pro

249、moting open data wherever possible,for example,European regulators could go much further with GDPR to push for consumer-ownership of data and firms just leasing it back.Finally,as digitised assets can be traded internationally,the development of international standards will require collaboration bet

250、ween policymakers,financial services providers,and financial centres on regulation,standards,and benchmarking.Developments In Maritime Finance&Maritime Financial Centres _ _ 50 www.kbfc.or.kr/eng/ESG Environmental,Social,and Governance Issues(ESG)refers to a framework used to the active management o

251、f the risks and opportunities associated with an organisations performance on various sustainability and ethical issues,including board governance,remuneration and moral hazards.ESG is increasingly used by large investors to evaluate company performance.Within the maritime sector,the Poseidon Princi

252、ples54 establish a framework for assessing and disclosing the climate alignment of ship finance portfolios.They set a benchmark for what it means to be a responsible bank in the maritime sector and provide actionable guidance on how to achieve this.A recent report by Deloitte55 found that“There is a

253、 belief in the maritime industry that shipping companies which are improving in ESG areas,amongst other things,gain significantly easier access to capital and sources of finance.”Currently,the most significant ESG issue of concern to the maritime sector is that of carbon emissions.In 2018,global shi

254、pping emissions represented 1,076 million tonnes of CO2,and were responsible for around 2.9%of global emissions caused by human activities,this is projected to rise significantly by 2050,in line with the growth of the global fleet56.Greenhouse gas emissions have a triple relevance to shipping compan

255、y risk:1.Bunker fuel price volatility-the cost of bunker fuel is tied to global oil prices.Reducing emissions through fuel efficiency,reduces costs and exposure to price shocks-see figure 16.2.Emissions trading-In January 2024,the EUs Emissions Trading System(EU ETS)will be extended to cover CO2 emi

256、ssions from all large ships(of 5,000 gross tonnage and above)entering EU ports,regardless of the flag they fly.The system covers:54 The Poseidon Principles https:/www.poseidonprinciples.org/finance/wp-content/uploads/2019/07/Poseidon_Principles.pdf 55 Deloitte 2021 ESG in the Shipping sector The rol

257、e of ESG in the evaluation of shipping companies https:/ 56 IMO 2020 Fourth Greenhouse Gas Study 2020 https:/www.imo.org/en/OurWork/Environment/Pages/Fourth-IMO-Greenhouse-Gas-Study-2020.aspx Developments In Maritime Finance&Maritime Financial Centres _ _ 51 www.kbfc.or.kr/eng/50%of emissions from v

258、oyages starting or ending outside of the EU(allowing the third country to decide on appropriate action for the remaining share of emissions).100%of emissions that occur between two EU ports and when ships are within EU ports.To ensure a smooth transition,shipping companies only have to surrender all

259、owances for a portion of their emissions during an initial phase-in period:2025:for 40%of their emissions reported in 2024.2026:for 70%of their emissions reported in 2025.From 2027 ship owners will be required to hold sufficient EU Allowances(EUAs)to cover all their emissions(EUA are currently tradi

260、ng at around eighty euros per tonne).3.IMO Net Zero Targets-In July 2023,IMO Member States adopted the 2023 IMO Strategy on Reduction of GHG Emissions from Ships,this includes an enhanced common ambition to reach net-zero GHG emissions from international shipping by 2050,a commitment to ensure an up

261、take of alternative zero and near-zero GHG fuels by 2030,as well as indicative checkpoints for international shipping(a 20%reduction by 2030 and 70%by 2040.It is worth adding that climate change is no longer a theoretical risk to the maritime sector as a recent report by CNBC testifies:“The Panama C

262、anal Authority is implementing additional vessel reductions in an effort to conserve water as a drought exacerbated by a severe El Nino weather system continues to plague water levels in the locks of the key global trade conduit.According to Panama Canal authorities,the drought requires them to redu

263、ce the number of daily transits from 29 to 25 ships and in the proceeding weeks,they will reduce vessels transits even more until it declines to 18 ships a day in February.That represents between 40%-50%of full capacity.Under normal conditions,between 34-36 vessels traversed the canal daily.The drou

264、ght and vessel reductions are having a major impact on the flow of trade,according to data from CNBC Supply Chain providers57.”57 CNBC 2023 Panama Canal drought hits new crisis level with nearly half of vessel traffic targeted for cuts https:/ Developments In Maritime Finance&Maritime Financial Cent

265、res _ _ 52 www.kbfc.or.kr/eng/Disruption to the Panama canal will mean either delays in shipping,or owners having to re-route around the cape,a longer,more fuel intensive and more hazardous voyage.Figure 23|Average Price of Low Sulphur Bunker Fuel Oil 2019-2023 Source:Statista When this is coupled w

266、ith requirements to reduce sulphur,nitrogen and black carbon emissions,ship owners need to invest significant amounts in propulsion technology and other pollution mitigation measures.Air pollution-The MARPOL treaty Annex VI requires abatement technology to be fitted to ship exhausts,and the IMO impo

267、sed new limits on the sulphur content of marine fuel oils to reduce harmful emissions of atmospheric pollutants.However,there is some concern that the scrubber systems designed to reduce atmospheric discharges of sulphur oxides and nitrogen oxides(thus allowing ship owners to burn more sulphur rich

268、fuels)are resulting in the discharge of acidified wastewater which is affecting marine biodiversity58.Solving this problem will require more innovation and investment in new technology by ship owners.Sustainable Ports-Ports themselves are facing greater pressures to comply with regulatory and societ

269、al requirements for operational sustainability and are increasingly taking action in 58 Chambers S 2023 Scrubbers have saved container shipping$12bn:Sea-Intelligence https:/ In Maritime Finance&Maritime Financial Centres _ _ 53 www.kbfc.or.kr/eng/this area as it has become a consideration when shipp

270、ing companies are determining which port to use59.A port which is operating at a high level of sustainability is more likely to attract support from the government,communities,and the public,as well as potential investors in the maritime industry60(see box 1).In 2017,the International Association of

271、 Ports and Harbors established the World Ports Sustainability Program(https:/sustainableworldports.org/)which is guided by the UN SDGs.The program aims to enhance and coordinate the sustainability efforts of ports worldwide and foster international cooperation with partners in the supply chain.59 Al

272、amoush A.et al 2021.Revisiting port sustainability as a foundation for the implementation of the United Nations Sustainable Development Goals Journal of Shipping and Trade volume 6,Article number:19 https:/ 60 UNCTAD 2015 Review of Maritime Transport 2015 https:/unctad.org/publication/review-maritim

273、e-transport-2015 Box 1 Sustainable Innovation In Ports Busan Port Authority and the Korean Ministry of SMEs and Startups have installed a piezoelectric power generation system which harvests energy from the pressure and vibrational loads of trucks passing through the gates of the container terminal.

274、The prototype system was installed at one gate in 2022 and produces 45 MWh/a year.The intention is to instal the system at all 47 terminal gates in the Busan New Port,to generate 2,115 MW/h a year,reducing annual emissions by around 936t CO2eq annually.The system will supply electricity to port ligh

275、ting,unloading equipment,and electric vehicle charging stations.Developments In Maritime Finance&Maritime Financial Centres _ _ 54 www.kbfc.or.kr/eng/Green Finance Green bonds are financial instruments that allow issuers to borrow money for investments that have positive environmental impacts.Ever s

276、ince their debut in 2007 with the AAA-rated issuance from the European Investment Bank(EIB),the green bond market has seen exponential growth(see figure 24).Figure 24|The Exponential Growth Of The Green Bonds Market Source:Carbon Bonds Initiative Green bonds are debt issuances where the proceeds mus

277、t be applied exclusively to finance(in part or in full)projects that promote progress on environmentally sustainable activities,such as reducing waste,enhancing biodiversity,or reducing emissions(through renewables generation,green transport,or energy efficiency programmes).Like green bonds,but focu

278、sed on beneficial societal outcomes are social bonds,with a further subset,sustainability bonds,combining elements of both social and environmentally beneficial outcomes.Initially,green bond issuance was the exclusive purview of supranational financial institutions-after the EIB issued its equity in

279、dex-linked bond in 200761,the World Bank issued a labelled 61 Kreivi E 2017 Green Bond Market Development and EIB https:/www.eib.org/attachments/green-bond-market-development-and-eib.pdf Developments In Maritime Finance&Maritime Financial Centres _ _ 55 www.kbfc.or.kr/eng/green bond in 200862,and in

280、 2010 the International Finance Corporation issued its first bond.In 2013,the first corporate green bond was issued by Vasakronan,a Swedish real estate company,and the flood gates were opened.December 2020 saw the cumulative issuance of green bonds,worldwide,reach USD 1 trillion and it is forecast t

281、hat green bond investment in a single year is set to double and reach USD 1 trillion for the first time by the end of Q4 2022.Within the maritime sector although uptake was initially slow,the issuance of green bonds has accelerated rapidly in recent years.Issuances have been made by the worlds secon

282、d-largest container line,Maersk Seaspan Corporation a division of Atlas Corp,which leases vessels to container lines as well as Hapag-Lloyd,a container line that owns and operates 230 ships.Maersk launched a EUR 500 million(USD 496.3 million)green bond in November 2021 to partially finance its USD 3

283、.7 billion order for methanol-fuelled vessels,and in September 2023 it issued a second bond for USD 750 million to further finance its decarbonisation efforts63.Small and medium-sized shipping companies have also begun to focus on green bonds for financing.Medium-sized shipping companies in South Ko

284、rea,such as Pan Ocean and SK Shipping Co.,issued green bonds in 2021.The value of the issuances was approximately$44 million for Pan Ocean and$34 million for SK Shipping,respectively.Pan Ocean intended to use the proceeds for the purchase of eco-friendly LNG ships,while SK Shipping focused on instal

285、ling scrubbers and ballast water treatment systems on its ships.To qualify for green bond finance,vessels need to meet specific criteria outlined by organizations or standards like the Climate Bonds Initiative,the EU Taxonomy,or the Green Shipping Programme.That typically means that the AER(Annual E

286、fficiency Ratio)or the EEOI(Energy Efficiency Operational Index)need to be below defined decarbonization trajectories.The EU Taxonomy,however,also allows use of the EEDI(Energy Efficiency Design Index)and defines specific requirements for vessels retrofitting.62 World Bank 2022 The Worlds First Gree

287、n Bond https:/youtu.be/i3gIJrABLSc 63 ESG News 2023 Shipping Giant Maersk taps$750M Investment for First Dollar Green Bond https:/ In Maritime Finance&Maritime Financial Centres _ _ 56 www.kbfc.or.kr/eng/Table 4|The Issuance Of Green Bond By Global Maritime Companies Source:Marine money Green bonds

288、cannot finance ships that carry fossil fuel,yet the tanker and gas carrier sectors are possibly in most in need of capital.The tanker market has only just ended an 18-month period of pandemic-induced loss-making,while orders for LNG carriers have surged in the past 12 months due to the war in Ukrain

289、e.Maritime Companies Transaction date USD Million Details NYK line May 24,2018 91.48 Refinancing LNG-fuelled ships,LNG bunkering vessels,ballast water treatment systems,and exhaust gas scrubbers Teekay Shuttle Tankers Oct 10,2019 125 Refinance intercompany debt relating to 4x LNG-fuelled suezmax DP2

290、 shuttle tanker new buildings Altera Shuttle Tankers LLC Aug 21,2020 75 Refinance intercompany debt relating to 4x LNG-fuelled suezmax(related to the above Teekay deals)Bonheur ASA Sep 9,2020 77.65 Low-carbon and climate resilient development Sembcorp Industries Ltd Jun 2,2021 302.43 Refinance proje

291、cts under the companys Green Financing Framework that meet Climate Bonds Initiative sector-specific technical criteria Bonheur ASA Jun 30,2021 81.31 refinancing existing intercompany debt.A.P.Moller-Maersk A/S Nov 19,2021 565 construction of a feeder vessel and 8x large container vessels capable of

292、operating on carbon neutral methanol Hyundai Heavy Industries Mar 24,2022 300 finance the construction of eco-friendly vessels and establish a system of sustainable growth based on ESG management A.P.Moller-Maersk A/S Sep 15,2023 750 finance the construction of eight methanol-powered vessels Develop

293、ments In Maritime Finance&Maritime Financial Centres _ _ 57 www.kbfc.or.kr/eng/Sustainability-linked bonds(SLBs)are a subset of green bonds however,they differ from green bonds in several crucial ways:Firstly,and most importantly the funds raised are not tied to a specific project,but a corporate(or

294、 national)objective for example absolute reductions in carbon emissions(scope 1 2,or 3).Liberating the proceeds from a specific project,frees the issuer to deliver sustainability improvements using a wide range of means this may include education and training,the recruitment of specialist staff,and

295、the reorganisation of procurement systems as well as more traditional avenues such as the purchase of plant,machinery,intellectual property,or land.Secondly,SLBs are issued with specific sustainability performance targets(SPTs),which contain key performance indicators(KPIs),for example:“A 40%reducti

296、on in CO2 emissions from fleet wide activities by 2030”.Thirdly if the SPT is missed,the bond is subject to a“step-up”clause,meaning the bond interest increases.Equally if a SPT is surpassed by an agreed amount a“step down clause”can decrease interest.Khazanah Nasional Berhad,the sovereign wealth fu

297、nd of Malaysia was the first entity to issue a policy performance bond in 2017 when it raised RM 100 million from the issuance,but the first true SLB was issued by Eni in 2019 with Schneider Electric following in 2020.These bonds are designed to pay up to 0.5%of their nominal value if they fail to m

298、eet their sustainability performance targets.Since their initial issuances SLBs have become are a small,but rapidly growing sector of the Green,Social,Sustainability,Sustainability-linked and transition bonds(GSS+)market which despite a rocky road for fix income instruments has held its market share

299、.In January 2021,Norwegian tanker operator Odfjell SE became the first shipping company to issue a Sustainability-Linked Bond64.The company linked their NOK 850 million bond to a target of reducing the carbon intensity for their controlled fleet by a minimum of 50%by 2030 64 Odfjell 2021 Odfjell SE

300、successfully places shippings first Sustainability-Linked Bond https:/ In Maritime Finance&Maritime Financial Centres _ _ 58 www.kbfc.or.kr/eng/compared to 200865.They were rapidly followed by bond offerings from Hapag-Lloyd and Wallenius Wilhelmsen.Listed tanker owners including Hafnia,Ardmore Ship

301、ping Corporation,International Seaways,dAmico and Euronav all announced sustainability-linked deals in 202266.With respect to the Green Bond and SLB sector,the Oslo stock exchange has developed a specialism in this niche market67 and has been successful in attracting a great deal of business and oth

302、er financial centres with green bond specialisms are beginning to view this lucrative area with interest.65 Nordea 2022 Sustainable finance propels shippings green transition https:/ 66 Bockmann M 2022 Green goes mainstream in shipping finance https:/ Dixon G 2023 Oslo bond market hot as Ocean Yield

303、,Kistefos and KCC seeking$234m combined https:/ Developments In Maritime Finance&Maritime Financial Centres _ _ 59 www.kbfc.or.kr/eng/Table 5|The Issuances Of SLBs By Global Maritime Companies Source:Marine Money In terms of global growth in Green Bonds,Sustainability Bonds,and Sustainability-Linked

304、 Bonds(SLBs),the rapid rise of ESG(Environmental,Social,and Governance)bonds governed by the Korea Exchange at the Busan International Finance Centre clearly demonstrates such trends.South Koreas ESG bond issuances have exceeded KRW 100 trillion(approximately USD 76.92 billion).Maritime Companies Tr

305、ansaction date USD Million Details SFL Corporation Ltd.Jan 19,2023 150 Refinance existing bonds and general corporate purposes Seaspan May 18,2022 500 To pay down existing debt,fund capital expenditures,and other general corporate purposes.Wallenius Wilhelmsen ASA Apr 6,2022 134.89 Refinance existin

306、g debt and other general corporate purpose Seaspan May 24,2021 450 1.)the alignment of the collateral vessels carbon intensity with the IMO 2050 decarbonization trajectory and 2.)fostering cooperation with charterers,including sustainability-linked provisions in charter contracts Seaspan Jan 21,2021

307、 200 Acquisition,newbuilding,or retrofit of vessels which can be powered by alternative fuels.Odfjell SE Jan 14,2021 100.36 Reducing the carbon intensity of its controlled fleet to 50%of its 2008 levels by 2030 Developments In Maritime Finance&Maritime Financial Centres _ _ 60 www.kbfc.or.kr/eng/Fig

308、ure 25|The Issuance Of ESG Bonds In South Korea,Governed By The Korea Exchange At The Busan International Finance Centre(SRI Bonds Market)Globally,the issuance of ESG bonds surpassed USD 1,000 billion by 2022.However,surging energy and raw material costs,brought about by the Russia-Ukraine war,have

309、had adverse effects on sustainable finance.Figure 26|The Issuances Of ESG Bonds globally.Source:KRX Source:KRX Developments In Maritime Finance&Maritime Financial Centres _ _ 61 www.kbfc.or.kr/eng/Green&Sustainability-Linked Loans(GSLL)-Green loans offer a lower rate of interest,as much as 10%of the

310、 cost of capital if the borrower reduces their impact on the environment and are distinct from green bonds in that lenders do not tie the loan to a specific use but link the cost of capital to overall company performance on sustainability68.Driven by a wish to support low emissions targets,an increa

311、sing number of banks have joined the Poseidon Principles,a framework for assessing and disclosing the climate alignment of ship finance portfolios,which set a benchmark for responsible bank in the maritime sector.Currently 35 banks are members,representing around USD 300bn in lending69.Typically,len

312、ders track sustainability metrics against third party benchmarks,such as the Carbon Disclosure Project,or Sustainalytics and re-calculate rates depending on the borrowers sustainability performance.Although the original concept of GSLL was developed by Dutch banks,once again it is Nordic banks,such

313、as Nordea Bank and Skandinaviska Endkilda Banken,that have led the charge with shipping focussed GSLL facilities,although ABN AMRO Bank and Credit Agricole have also developed offerings in this area.In April 2023,Malaysian shipping company MISC Berhad(MISC)entered into a USD 527 million sustainabili

314、ty-linked loan for the financing of six very large ethane carriers(VLECs).The Korea Development Bank,Sumitomo Mitsui Banking Corporation,Labuan Branch,DBS Bank,Export-Import Bank of Malaysia Berhad and MUFG Bank Singapore Branch were part of the consortium that arranged the loan70.68 ICMA 2019 Susta

315、inability Linked Loans Principles https:/www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/LMASustainabilityLinkedLoanPrinciples-270919.pdf 69 https:/www.poseidonprinciples.org/finance/signatories/70 Mandra J 2023 MISC inks half a billion dollar sustainability-linked loan https:/www.offshore

316、-energy.biz/misc-inks-half-a-billion-dollar-sustainability-linked-loan/Developments In Maritime Finance&Maritime Financial Centres _ _ 62 www.kbfc.or.kr/eng/3.New Challenges For Maritime Financial Centres There are currently two key areas where developments hold significant implications for marine f

317、inancial centres the net zero transition and information technology(including blockchain,AI,IoT and the metaverse/Augmented Reality).The Net Zero Transition As discussed in section two,the maritime sector is under pressure to reduce its carbon emissions.In practical terms the impact of net zero poli

318、cies on the global fleets has two aspects-direct emissions,and cargo.Direct Emissions With respect to direct emissions from vessels,the IMO has brough in a series of regulations.These include:The Energy Efficiency Design Index(EEDI)this was introduced by the IMO in 2011,(through amendments to MARPOL

319、 Annex VI)71.The EEDI mandates technical and operational energy efficiency measures to reduce the amount of CO2 emissions from international shipping.The Ship Energy Efficiency Management Plan(SEEMP)this entered into force on 1 January 201372.A SEEMP is a ship-specific plan to improve the energy eff

320、iciency of a ship.SEEMPS are mandatory for all ships above 400 Gross Tonnes(GT)which are engaged in international voyages,forms part of the ships safety management system and is subject to audit and verification.The Data Collection System(DCS)this was applied by the IMO in October 2016 and requires

321、ships to record and report their fuel oil consumption to have the necessary data to make decisions on further measures to improve the energy efficiency of ships.71 IMO(Accessed 24 November 2023)EEDI-rational,safe,and effective https:/www.imo.org/fr/MediaCentre/HotTopics/Pages/EEDI.aspx 72 AMSA(Acces

322、sed 24 November 2023)Ship Energy Efficiency Management Plan(SEEMP)https:/www.amsa.gov.au/marine-environment/air-pollution/ship-energy-efficiency-management-plan-seemp#:text=A%20Ship%20Energy%20Efficiency%20Management,energy%20efficiency%20of%20a%20ship.Developments In Maritime Finance&Maritime Finan

323、cial Centres _ _ 63 www.kbfc.or.kr/eng/The Energy Efficiency Existing Ship Index(EEXI)and Carbon Intensity Indicator(CII)these regulations came into force in January 2023.The EEXI indicates the energy efficiency of a ship compared to a baseline,and the CII determines the annual reduction factor need

324、ed to ensure continuous improvement of a ships operational carbon intensity within a specific rating level.Both of these regulations are mandatory for all vessels above 400 GT and although EEXI compliance does not necessarily require technical modifications to a ship,in practice this is likely to be

325、 required for many vessels to achieve the minimum required EEXI rating of“C”or above.The maritime finance implications of this regulatory regime are wide ranging:Market access Some ports may restrict access to allow only A,B or C ships,or they may charge higher port fees for D and E ships,pushing up

326、 costs for owners of older vessels and reducing available fleet capacity.Conversely,the CII does not attribute fuel consumption to specific stages of a voyage or operations,including anchoring.Consumption during anchoring(e.g.,for generation of auxiliary power)is simply considered as consumption wit

327、hout distance travelled,and hence has an adverse impact on the ships CII rating73.As a result,long waiting times to enter the port,and long port stays(which are often outside of the control of the ship operator)will negatively impact the CII rating,resulting in some operators avoiding ports with a r

328、eputation for congestion or inefficient operations.Customers seeking to enhance their ESG ratings may seek high CII scores from the vessels they charter.From a charterers perspective,whilst CII is an operational measure and can be managed through trading patterns,the CII performance of a ship is lin

329、ked to other factors,such as design,maintenance and warranted fuel consumption.If any of these factors is not as described in the charter party,then disputes are likely to arise.73 IMO 2022 Carbon Intensity Indicator(CII)A port and terminal perspective https:/greenvoyage2050.imo.org/wp-content/uploa

330、ds/2023/01/Carbon-Intensity-Indicator-A-port-and-terminal-perspective.pdf Developments In Maritime Finance&Maritime Financial Centres _ _ 64 www.kbfc.or.kr/eng/One way for a vessel to achieve its CII score is to reduce its speed74.Although relatively cheap to implement(for example through the additi

331、on of an Engine Power Limitation system(EPL),reducing speed by up to 25%could result in a concomitant increase in voyage time.All these factors could cause a potential shortfall of available vessels and push up charter prices,adding volatility to the futures market.Vessel value According to recent r

332、esearch75,CII is becoming increasingly influential in the sale and purchase market.At present,this is primarily manifesting in the liquidity of vessels.This is consistent with the expectation that vessels in band E will carry capital requirements or will see their earnings potential reduce.This may

333、result in a markdown of the corporate valuation of shipping companies with older fleets.Finance As discussed in sections one and two,accessing finance has become increasingly difficult for shipowners.Given that CII ratings will impact on both the utility and lifespan of vessels(particularly second-hand vessels),lenders are likely to impose additional conditions on lending to reduce risk76.Fleet re