Decarbonization unleashed

Cross-supply chain collaboration plays a pivotal role in unlocking technological breakthroughs. What role can investors play in steering and promoting this phenomenon?

Carbon capture is dependent on compression technology, transportation, and utilization or storage. Adoption of alternative fuels in transportation depends not only on novel engine technology, but also reliable supply of climate-friendly fuels. In addition, companies adopting these technologies need support from their customers who must accept paying a green premium for some uncertain time. These are just two examples where supply chain collaboration is required for commercial adoption of climate-positive technology. Any links—some of which are still under development—that do not pull their weight will cause the whole chain to break.

Breakthrough technologies aimed at decarbonization often find themselves trapped in a Catch-22 dilemma. If everyone is waiting for someone else to make the first move, progress cannot be made. The untested nature and high associated costs of these innovations pose a significant barrier to widespread adoption. To overcome these obstacles, it is imperative to build supply chain coalitions that enable all parties involved in this ecosystem to share the risks.

As companies pivot to pursue business opportunities in decarbonization solutions, some technologies require the formation of entirely new supply chains. This introduces complexities and time-consuming processes as new business relationships must be forged. This is where investors can play an important interceding role.

Investors with sector expertise and deep networks can act as facilitators, making introductions and bringing together multiple parties to form coalitions. Also, investors can play an active role in bridging funding gaps, which may well be the difference between technology adoption today versus years in the future.

By fostering connections between companies, investors contribute to the creation of a collaborative ecosystem. This ecosystem, in turn, propels the development and implementation of breakthrough technologies that are essential for achieving ambitious decarbonization goals.

The journey toward decarbonization in the shipping industry—responsible for 3% of global emissions¹—is not without its challenges. Ship owners face daunting uncertainties when ordering untested engines, securing fuel in new ways from unfamiliar suppliers, and navigating the willingness of charter companies to absorb the necessary green cost premiums. These challenges are not unique to the shipping sector, but they epitomize the barriers that delay widespread adoption of sustainable technologies.

A collaborative initiative organized by UBS seeks to confront these challenges. In September 2023 our London office hosted a meeting with key stakeholders across the shipping value chain including ship owners, fuel producers, engine manufacturers, and chartering companies. The objective was clear: Foster dialogue, seek common ground, and work collectively toward de-risking ship owners’ investments in alternative engine technologies.

As we navigate the complex landscape of decarbonization, the role of supply chain collaboration in unleashing technological breakthroughs cannot be overstated, from shipping to carbon capture, utilization, and storage. It acts as the bridge that connects innovators, companies, and investors, creating a symbiotic relationship where confidence is built, risks are shared, and breakthroughs become not just possible but galvanized. Investors, armed with subject matter expertise and deep networks, have a unique opportunity to become catalysts for collaboration, propelling industries toward a sustainable future.

The author is grateful for feedback from: William Nicolle, Jackie Bauer, Richard Mylles, Mike Ryan.

¹Fourth IMO GHG Study 2020, 
https://wwwcdn.imo.org/localresources/en/OurWork/Environment/Documents/Fourth%20IMO%20GHG%20Study%202020%20-%20Full%20report%20and%20annexes.pdf

For further information, please visit www.ubs.com/institute-disclaimer