Exploring the sustainable blue economy for investors

Transforming the ocean economy into a sustainable one is central to Barclays’ commitment to the Paris Agreement, and our goal to become a net-zero bank by 2050.

Finding solutions to declining ocean health, as well as the wider climate challenge, will require a collective effort. That’s why we’re proud to sponsor and participate in Building Bridges 2021, a movement that brings together experts from the finance industry, the United Nations (UN), Non-Governmental Organisations, academics and government, to advance the sustainable finance agenda.

Protecting and sustaining our ocean will be critical in the fight against climate change. As a nation, the blue economy would be the world’s seventh-largest, and offers enormous investment potential, yet continues to attract relatively low levels of funding¹.

In a short introduction to the topic, Dennis Fritsch, Project Coordinator, Blue Sustainable Economy at the UN Environment Programme (UNEP) Finance Initiative, explains the importance of protecting our ocean, and where the potential risks and opportunities for investors lie.

Why is protecting our ocean so critical to tackling climate change and the wider sustainability agenda?

Our ocean covers more than two-thirds of the Earth’s surface. It’s home to 80% of all life, and is a vital source of food and livelihoods for nearly half of the people on the planet. It also regulates the global climate, acting as the largest natural carbon sink through critical ecosystems like mangroves, seaweed forests and coral reefs, which also play an essential role in providing ecosystem services to coastal communities. A 1.5ºC future and a thriving global economy are unimaginable without a healthy ocean, hence it should be centre stage in achieving climate and sustainable development goals.

What are the major challenges facing our ocean and what can be done to address them?

Human activities have already severely altered two-thirds of the marine environment, leading to a triple crisis concerning the climate, biodiversity loss and pollution². The rapid increase in anthropogenic CO2 emissions is resulting in ocean acidification, stratification, deoxygenation and warming. At the same time, overexploitation of marine resources, and degradation of ecosystems by increasing pollution, are also responsible for declining ocean health. 

It is becoming clear that a "business as usual" approach to ocean resources is no longer an option. Hence, we need to change how we manage, use and protect ocean resources, as sustainability is an underlying condition for growth and prosperity. 

Why do you think that Sustainable Development Goal (SDG) 14: ‘Life under water’ tends to attract lower levels of investment than other SDGs? What role do you think private capital can play in funding a sustainable blue economy, and how can we encourage more investment in this area?

Despite growing momentum among the finance community around the blue economy, SDG 14 remains the most underfunded of all SDGs. This is partly due to a poor understanding of ocean-related risks and opportunities for the finance sector. To mobilise finance, understanding that major global industries both depend on, and impact, the ocean’s health is fundamental.

Collectively, investors have an enormous impact on ocean health, as they provide the resources required to power ocean-linked sectors. Building resilience and long-term stability into marine industries offers opportunities to financial players in reducing risks and ensuring that their activities provide long-term viability and profitability.

What risks relating to the blue economy should investors be mindful of?

In terms of general economic risks, the Intergovernmental Panel on Climate Change (IPCC) estimates that climate-induced declines in ocean health will cost the global economy almost USD 2 trillion per year by the end of the century³.A business-as-usual scenario would potentially imply up to USD 8.4 trillion in costs to the global economy over the next 15 years, according to a recent World Wide Fund for Nature (WWF) report⁴.

Investors should be aware of the potential for increased default risks, reputational damage, non-compliance with growing stringent environmental legislations, and reduced returns on investments in the long run. 

There are many areas of opportunity for investors looking to support a more sustainable blue economy, including clean energy, fishing, aquaculture, shipping, tourism and tackling plastic pollution (as outlined in our previous article ‘The big blue opportunity’). How might investors decide where to focus? Are there any areas which stand out for you in terms of (climate) impact potential, or particular need for funding?

In order to make efficient financial decisions, investors need to have access to reliable and updated information on ocean-related economic risks and opportunities. The Sustainable Blue Economy Finance Principles⁵, the Turning the Tide Guidance and its Exclusion List⁶, offer a pioneering guiding framework to align global financial flows with SDG 14. 

This practical and free toolkit covers five key ocean-linked sectors, and provides recommendations for asset owners and managers on how to avoid and mitigate environmental and social risks, as well as on how to make the most of opportunities in the sustainable blue economy. In my view, investments in nature-based solutions, and businesses offering solutions to ocean health challenges and nature-positive impact, will be key.

Any final thoughts for anyone considering investing in this theme?

We need to scale up action to mainstream holistic sustainability considerations that are based on science and include equity and justice concerns across ocean-linked sectors. Investors have great leverage in pushing for such transformation. Using currently available tools, they can already start evaluating their impact on the ocean to reduce the damage unsustainable industries have on our marine life support system. I’d therefore encourage them to show leadership by using the Sustainable Blue Economy Finance Principles, and consider learning more through our community of practice in order to align financial flows with ocean health.

Related articles

Sustainability

This communication is general in nature and provided for information/educational purposes only. It does not take into account any specific investment objectives, the financial situation or particular needs of any particular person. It not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful for them to access.

This communication has been prepared by Barclays Private Bank (Barclays) and references to Barclays includes any entity within the Barclays group of companies.

The communication is:

1. not research nor a product of the Barclays Research department. Any views expressed in these materials may differ from those of the Barclays Research department. All opinions and estimates are given as of the date of the materials and are subject to change. Barclays is not obliged to inform recipients of these materials of any change to such opinions or estimates;
2. not an offer, an invitation or a recommendation to enter into any product or service and do not constitute a solicitation to buy or sell securities, investment advice or a personal recommendation;
3. is confidential and no part may be reproduced, distributed or transmitted without the prior written permission of Barclays; and
4. has not been reviewed or approved by any regulatory authority.

Any past or simulated past performance including back-testing, modelling or scenario analysis, or future projections contained in this communication is no indication as to future performance. No representation is made as to the accuracy of the assumptions made in this communication, or completeness of, any modelling, scenario analysis or back-testing. The value of any investment may also fluctuate as a result of market changes.

Where information in this communication has been obtained from third party sources, we believe those sources to be reliable but we do not guarantee the information’s accuracy and you should note that it may be incomplete or condensed.

Neither Barclays nor any of its directors, officers, employees, representatives or agents, accepts any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this communication or its contents or reliance on the information contained herein, except to the extent this would be prohibited by law or regulation.