Superyacht owners rely on a network of trusted advisors to ensure their assets are being properly managed, maintained and operated in the most productive and efficient manner. Add to this a growing pressure to decarbonise and this remit is now more challenging than ever before.

The climate emergency is shifting the commercial landscape in all directions and the consequences of inaction will only increase, even to the point where a vessel can no longer legally operate. As captains and advisors, it’s our responsibility to act in the best interests of the owner and to provide the best possible advice on every aspect of superyacht ownership, and this includes risk management across the board. The very real prospect of stranded assets cannot be overstated; it poses an existential threat to the entire industry and our survival will be determined by what we do, or fail to do, today.  

What is a stranded asset?
A stranded asset is defined as “an asset which loses economic value well ahead of its anticipated useful life” (Daniela Saltzman, Stranded Carbon Assets). This unanticipated devaluation can be caused by a range of risk factors, including changes in legislation, market forces, environmental challenges, social norms and consumer behaviour.

Decarbonisation
The IPCC 6th assessment 2023 report on climate change summarises the current trajectory as follows: “Limiting human-caused global warming requires net zero CO2 emissions. Cumulative carbon emissions until the time of reaching net-zero CO2 emissions and the level of greenhouse gas emission reductions this decade largely determine whether warming can be limited to 1.5°C or 2°C (high confidence). Projected CO2  emissions from existing fossil-fuel infrastructure without additional abatement would exceed the remaining carbon budget for 1.5°C (50 per cent).”

These facts are well known, yet the superyacht industry continues to fly in the face of growing scrutiny from regulators, legislators, the marketplace and society at large.

Social uprising
We are seeing an increase in laws, public protests and negative stories in the media against the level of emissions, as well as criticism of the overall footprint of the UHNWI lifestyle.

Avoiding scrutiny is not a matter of privilege. Whichever way you look at it, whether moral, financial or existential, the time to implement a credible and practical strategy towards decarbonisation is now. Whether or not an individual owner is motivated by environmental concerns, owners’ reps and their inner circle have an urgent obligation to impress upon their clients the very real threat of reputational damage and financial losses.

Nigel Marrison, founder, Blue ESG

Regulatory pressures
From a regulatory perspective, it’s only a matter of time before MARPOL Annex VI CII and SEEMP Part III regulations from the merchant fleet filter down to include luxury yachts.

The EU Emissions Trading System (EU ETS) aims to reduce greenhouse gas (GHG) emissions by setting limits. EU ETS is currently applicable for ships above 5,000gt on EU-related voyages, although in future may include other ship types and sizes with the potential to impact the operation of superyachts.

Legislative changes
The United Nations Net-Zero Banking Alliance (NZBA) is an industry-led, UN-convened group that aims to accelerate the implementation of decarbonisation strategies. It brings together 125 banks in 41 countries, representing more than 40 per cent of global banking assets, committed to aligning their lending and investment portfolios with net-zero emissions by 2050.

The insurance industry is implementing similar measures as defined in the Poseidon Principles which requires alignment with Net Zero 2050 targets across their portfolios.

From a financial perspective alone, superyacht owners will be forced to accept that they are not immune. A refusal to align with global-emissions goals will increasingly pose a challenge to the operation of their yacht.

Climate change, regulation and societal acceptance are deeply interconnected, and how we tackle these issues today will determine the very future of luxury yachting. Compared to every other sector, the superyacht industry is lagging conspicuously behind.

Project ‘Yacht Zero’
In collaboration with the decarbonisation team at Lloyd’s Register, Blue ESG has designed and developed a superyacht-specific Carbon Intensity Indicator (CII) analogous to IMO MARPOL Annex VI CII and SEEMP Part III for the merchant fleet.

Project ‘Yacht Zero’ is a data-collection, analytic tool allowing individual vessels to establish baseline data and facilitate tracking and reporting for operational emissions.

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Blue ESG

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