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.
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