Sustainable investing case study: All at sea

Sustainable investing case study: All at sea

By Flora Wang, Director Sustainable Investing
Terence Tsai, Shipping Analyst

The power of active engagement: Investors join forces to help bring a stop to a humanitarian crisis at sea and safeguard the long-term sustainability of global supply chains.

A crisis in the making

It was quite early in the pandemic when Fidelity shipping analyst Terence Tsai started hearing about disruptions to global maritime activity.

Restrictions on travel and trade were closing off ports and cancelling flights, causing severe delays to the ordinary rotation of cargo vessel crews between their ships and home ports. Tsai soon saw it was not just a liability for the commercial shipping sector but also a brewing humanitarian crisis for the hundreds of thousands of seafarers who are the engine of global trade.

 Seafarers are vital to the global supply chain as they ensure the uninterrupted global delivery of a vast array of goods and products. Yet Covid-related restrictions on movement or port arrivals coupled with the drastic reduction of flights has meant that some seafarers have been forced to work for 15 months or more way beyond the industry nine-month standard. These long periods of isolation are raising mental and physical health issues and concerns around the safe handling of cargo.

Part of the issue comes down to how commercial seafarers have been classified through the outbreak. Countries have relied on shipping to cope with lockdowns under Covid, yet seafarers are not widely recognised by governments as so-called ‘essential workers’ or ‘key workers’ who would generally be granted exceptional rights to disembark in a port. This is a major issue that has prohibited merchant seamen from returning home. Most recently, in a September statement, United Nations agencies including the International Maritime Organisation jointly urged governments to treat seafarers as key workers to help resolve this humanitarian crisis.

A key-worker label would help ensure seafarers are exempt from travel restrictions and are able to board and disembark at different ports - removing a multitude of roadblocks, including visa restrictions and constantly changing local customs rules.

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Active engagement

Prompted by Tsai’s concerns, Fidelity’s global team of experts in sustainable investing launched a campaign to raise awareness over the wellbeing of seafarers. 85 investors representing over US$2trillion in assets, answered the call, urging the United Nations to act.

In an open letter to the UN signatories highlighted a number of measures to be put into effect:

  • Continuing to call for the official designation of seafarers as “key workers” and the establishment of systematic processes to enable safe crew changes such as safe corridors and testing regimes
  • Raising awareness, through a targeted publicity campaign, of the scale and risks that this crisis is already creating for seafarers and sustainable supply chains
  • Sharing the International Maritime Organisation’s (IMO) 12-step protocol with relevant entities to facilitate universal implementation
  • Ensuring seafarers should not spend more than the legal maximum of 11 months on board and limiting any unavoidable crew contract extension
  • Urging charterers, especially those that charter vessels on a frequent basis, to be flexible with route deviation requests from shipping companies to facilitate crew change and to consider financial support for the costs of crew repatriation.

Signatories have agreed to engage relevant portfolio companies to communicate their expectations around these measures.

Calling it out

Surprisingly, until recently there had been little discussion in the investment community about the issue of the wellbeing of seafarers, despite both the humanitarian concerns and general operational risks it posed to shipping companies.

 With about 90 per cent of global trade done by sea, seafarers are the lifeline for keeping our economies open.

For an asset manager like Fidelity, lobbying to improve the conditions of seafarers makes sense from an investment perspective too. The performance of some of the companies held by our funds will ultimately be linked to the safety of cargos being handled by seafarers. Ensuring that the rights and interests of seafarers are represented helps lower the operational risks to the sectors involved and allows global trade to continue in a sustainable way.

 Fidelity’s awareness campaign isn’t intended to offer prescriptive answers to this complex problem; instead it aims to help prompt stakeholders across the supply chain to work together to find the best solution. As we navigate through the Covid crisis, it becomes even more crucial to take an active role in engaging with the companies in which we invest.

 

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.

This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

© 2021 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

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