The big blue opportunity
At a critical moment in our fight against climate breakdown, we should remember the ‘blue’ in our efforts to be ‘green’. We proudly sponsored Monaco Ocean Week this month, an event that raises awareness of challenges and opportunities for investors in the ocean economy. As such, we’ve looked at several areas of the ocean economy that offer value to those who want to make returns while having positive impact.
Oceans have the potential to absorb around a third of global CO2 emissions1. They also absorb over 90% of excess heat generated, keeping the Earth cool.
However, they’re vulnerable to the effects of increased greenhouse gas and climate change. Around the world, oceans are becoming warmer and more acidic. Rising sea levels are affecting coastal and island communities. Marine life is being damaged and, in some places, vanishing. Physical effects of storms are becoming more frequent and severe.
But while there’s growing determination to meet the Paris Agreement commitments and transition to a lower carbon economy, the need to protect and conserve our oceans hasn’t always received the attention it deserves. Conspicuously, despite being one of the UN’s Sustainable Development Goals (SDGs), conservation of the ocean and sustainable use of its resources has attracted just 3.5% of overall investment2.
Sectors for sustainable ocean economy
Providing sustenance, industry and livelihoods, oceans are intrinsically linked to humanity. According to a WWF report, the goods and services from the ‘blue economy’ amount to about US$2.5 trillion each year – making the ocean the seventh-largest economy in the world3. Moreover, new research suggests that every $1 USD invested in sustainable ocean solutions will yield at least $5 USD in return4. Much of this growth will be driven by ocean-based policy interventions, as well as ocean-related industries such as energy generation, fishing, tourism and shipping.
Given the scale of such a market, investors have a range of entry points for their capital to make a positive contribution while seeking growth opportunities. We've highlighted six key areas of opportunity.
Renewable energy is a critical component to lower greenhouse gas emissions. Marine energy production is possible via wind, tidal, and wave sources. While offshore wind farms are currently the most common form, overall marine energy potential remains largely untapped, particularly with new technologies emerging.
For example, the world’s first semi-submersible floating wind farm became operational in January 2021, supplying electricity to Portugal. It illustrates the potential to situate such installations in much deeper waters. The first wave power company was listed on Nasdaq First in 2019 and is now planning an IPO on the US Nasdaq.
Commercial fishing has long been a source of ocean-related income. But if current practices continue, the world’s oceans could be virtually emptied of fish by 20485. A lack of action is not an option. Not only are fish vital to maintaining the ocean’s ecosystem, but over one billion people rely on fish as their primary source of protein.
Scientific studies6 have shown that sustainable fishing models – such as adopting innovative technologies to better monitor catches and minimise harmful discarding practices - while encouraging a wider adoption of Marine Stewardship Council standards could offer a big economic contribution. But steps to making these improvements are challenging and more investment in sustainable fishing practices can conserve ecosystems and sustain livelihoods.
An alternative to fishing, aquaculture is the farming of fish, crustaceans and aquatic plants under controlled conditions. Its use can help restore habitat and replenish wild populations of fish while producing the protein required to meet food security needs as the global population increases.
Generating protein on land can be inefficient, costly and environmentally damaging, so sustainable aquaculture can offer a more attractive and healthier solution. While aquaculture has been in existence for millennia, its commercial potential has only been harnessed in recent years and the industry is forecast to grow by 25-30% in a decade.
Over 90% of the world’s traded goods travel by sea, but the shipping industry’s reliance on fossil fuel generates sizeable carbon emissions. In 2018, the International Maritime Organisation set an ambitious goal of halving these emissions by 2050. To achieve this target, the industry will need to invest heavily in efficiency tools to improve nearly every aspect of a ship’s operations, as well as redeveloping its associated fuel and port infrastructure.
Improvements to deliver carbon-neutral shipping exist – just-in-time arrivals at ports, the digitisation of data collection, and information sharing between onboard systems – but extensive investment will be needed to accelerate this transition.
Between 2015 and 2025 the quantity of plastic waste in the ocean is set to double7. While this problem has gained some attention, current initiatives are only expected to reduce this problem marginally. The reality is we are still producing too much plastic and the consequences for ocean health are disastrous.
One solution is to move away from a linear take-make-waste model and transition towards a circular economy that prioritises the reuse of materials. Meanwhile, efforts are underway to accelerate the use of more readily recyclable materials and use better technology to improve recycling levels.
It has been suggested that 80% of all tourism takes place in coastal areas, making tourism one of the largest components of the ocean economy and oceans correspondingly important to tourism8. But when the impact on coastal ecosystems is taken into account, much of this tourism is unsustainable ecologically and commercially.
The OECD identified a move to sustainable tourism as a megatrend to ensure the sector’s viability and resilience to external shocks such as the pandemic and climate change9. Investment to make this shift has potential to accelerate the sector’s growth while reducing its environmental impact both locally and systemically.
Protecting our blue planet
A healthy ocean is a key pillar in our fight against climate breakdown and vital to ensuring ongoing biodiversity. With investment, we can restore natural ocean systems, replenish diminishing fishing stock, and harness the ocean’s carbon-capturing potential.
Achieving these goals requires raising awareness and stimulating action across industry, government and the investment community - exactly what Monaco Ocean Week 2021 aims to do. Barclays is proud to support this year’s Monaco Ocean Week, as we believe more collective action has the potential to both strengthen this critical natural ecosystem and generate attractive returns for dedicated investors.