Emerging technologies to watch for Apac ESG investors

Morningstar's Chris Terzis discusses opportunities in automated shipping and electric vehicles

Breakthrough technologies within shipping and electric vehicle industries will provide opportunities for Apac ESG investors this year, Morningstar Sustainalytics has said.

Speaking at a roundtable, Chris Terzis, senior director for client relations in Apac ex Japan at Morningstar Sustainalytics, said, for example, automating the shipping industry could provide better efficiencies and working conditions on ships in a market projected to grow to $12bn by 2028 from $6.55bn in 2021.

The automation of shipping will also reduce the number of shipping losses due to damage, crashes or human error.

“The benefit from an investors’ point of view is that automation reduces the related risk due to human error, which has accounted for an estimated 75% to 96% of marine casualties,” Terzis explained.

“With the advancement of technology, we see a definite benefit to the efficiency of the shipping industry and an improvement of the social outcome of individuals who work in the industry.”

He identified five companies that helped to automate the shipping industry, including two in the Europe – Kongsberg Gruppen and ABB – and three in South Korea – Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries.

Electric vehicles

The other emerging ESG space he mentioned was electric vehicles. The Inflation Reduction Act in the US and a number of incentives globally have reduced or banned the sale of new internal combustion vehicles, Terzis noted.

Morningstar predicts that electric vehicles will make up 30% of total auto sales in 2030, up from around 2% in 2020.

“The movement towards electric vehicles is quite obvious with regards to its positive impacts on the reduction of carbon footprints.”

Yet, Terzis warned that while these breakthrough technologies would bring interesting investment opportunities for sustainability investors and positive impact on the environment and society, one should also be mindful that there is a high level of uncertainty about nascent technologies.

For example, high technology may expose shipping companies to cyber security attacks and piracy risks, while electric vehicles makers face risks concerning litigation and warranty claims that will impact their long-term sustainable earnings.

He said: “With our assessment of risk, we identified that companies that have strong product governance framework in place in managing their product innovation and their technology development are going to be better positioned to avoid those risks.”