Sustainable ocean investing goes mainstream
The sea turtle is one of many ocean species that could benefit from market-based sustainable ocean investing. Image: Morgan Bennett-Smith
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- Market-based sustainable ocean investing is surging, with opportunities across all sectors and asset classes of the blue economy.
- Robust new frameworks are enabling innovative ocean investment strategies and laying a strong foundation for future ocean ESG initiatives.
- How to accelerate blue economy investing: more offerings for individuals and institutions; more science-based strategies; more collaboration.
The oceans’ contributions are well known – food, oxygen, transportation, recreation, heat absorption and more. Unfortunately, the oceans face severe challenges and the price tag to address them is jaw-dropping: according to one 2020 study, $174.5 billion is needed per year until 2030 to achieve the goals of the UN’s SDG 14, Life Below Water.
While governments, multilateral development banks, NGOs and philanthropists are boosting their commitments, the funding task remains daunting. Thankfully, market-based opportunities are emerging to help close the gap, with offerings across the blue economy – these include aquaculture and fisheries, marine renewable energy, ports and transportation, pollution management, ocean technology, and tourism. A key point: “market-based” means investors are seeking a return comparable to other market opportunities before taking into account societal benefits. These investors bring new sources of capital into the picture.
Market-based ocean offerings
Here are some examples (not intended as recommendations) of market-based sustainable ocean investing:
Public equity
- Credit Suisse Rockefeller™ Ocean Engagement Fund – Has a focus on active ownership and proactive engagement with ocean-related portfolio companies.
- Columbia Threadneedle/Posaidon Capital – A small and mid-cap impact fund targeting companies that use ocean resources more efficiently to gain a competitive advantage.
- Newday Ocean Health ETF – The recently launched US ocean exchange-traded fund, seeking industry-leading companies that contribute positively to ocean health.
Private equity
- Aqua-Spark – Invests in aquaculture across the value chain globally, reaching nearly €300 million in assets under management in 2021.
- SWEN Blue Ocean – Invests in ocean startups with the goal of generating both systemic impact and competitive market returns.
- Ocean 14 Capital – Invests in venture and growth companies and technologies that offer sustainable solutions for our oceans while generating attractive returns.
Fixed income
- Blue bonds have been mostly a mix of sovereign-driven securities and structures similar to debt-for-nature swaps; many of these are not widely distributed.
- Recent deals have increased in size and ADB’s Blue Bond Incubator, as well as the recently announced Practitioners Guide on Blue Bonds consortium, should stimulate more origination.
- Corporate blue bonds are likely on the way, which should open up more significant opportunities for investors.
- Seafood giant Thai Union created a Sustainability-Linked Financing Framework that has guided its ocean-related loan and bond issuance.
Early-stage companies
Hundreds of blue economy startups are springing up around the globe, nurtured by a worldwide ocean innovation ecosystem of accelerators, incubators, funds, hubs, clusters, platforms and competitions.
1000 Ocean Startups, a collaboration of ocean innovation organizations, brings together a cross section of these ecosystem participants. Qualified individuals and institutions are investing directly in startups and/or through the abovementioned intermediaries.
ESG for the seas
Environmental, social and governance (ESG) initiatives have been criticized for inadequate data, low ratings correlations, lack of transparency and greenwashing… the list goes on. But acronyms aside, investor focus on ESG factors is here to stay – and ESG remains a tool to draw attention to the right questions.
New research and platforms are laying the foundation for a useful Ocean ESG that can address the above critiques:
- Turning the Tide (UNEP FI) – Through a rigorous consultative process, UNEP FI created a detailed roadmap and toolkit for financial institutions seeking to align their activities to help the transition to a sustainable blue economy.
- Navigating Ocean Risk (WWF) – This is a first-of-its-kind model to assess cumulative financial risk and generate a “value at risk” (VaR) number for the ocean economy.
The WWF also contributed heavily to UNEP FI’s seafood guidance.
- Ocean Disclosure Initiative (One Ocean Foundation) – This seeks to be the first science-based ocean dedicated rating framework measuring company impact across all sectors with an emphasis on prevention, disclosure and reporting.
- Ocean 100 (Duke University and Stockholm Resilience Centre) – Illuminating view of the 100 global companies deriving most benefit from the oceans, with an eye towards substantial engagement (see chart below).
Other initiatives such as Planet Tracker and Coller FAIRR produce specific tools and research to enable deeper dives on ocean issues and companies. While only a dozen or so of the 60 companies in Coller FAIRR’s Protein Producer Index are aquaculture related, the analysis is comprehensive and used to enhance company engagement.
What's the World Economic Forum doing about the ocean?
This past June, with the support of Schmidt Marine Technology Partners, the organizations above joined Investable Oceans and senior leaders from an array of NGOs, asset managers, investors, regulatory and policy experts, ESG rating agencies, and scientists to discuss the current landscape and future prospects for Ocean ESG.
Here are a few highlights from the conference:
- Market-based investments multiplying: the variety is eye-opening.
- Robust frameworks emerging: comprehensive ocean ESG are some ways off, but current initiatives are thoughtful and thorough.
- Collaboration is vital: abundant wheel-reinvention-avoidance opportunities.
- Echoes of broader ESG issues: individual preferences likely to have significant impact on ocean strategies and portfolio construction.
- Engagement front and centre: extensive efforts are underway to interact with investors and companies.
In addition, CDP, the environmental disclosure and reporting pioneer, shared its plan to broaden its platform to include oceans, beginning with plastics issues in partnership with two leading NGOs. GRI previewed its since released Sector Standard for Agriculture, Aquaculture and Fishing, a significant extension into the ocean space. And 1000 Ocean Startups previewed its since released Ocean Impact Navigator, an open source impact measurement framework for ocean investors.
How to accelerate sustainable ocean investing
Sustainable ocean investing is gaining momentum. Products are proliferating, which means asset managers are seeing demand from their clients. Investors are engaged, though more on the individual side than institutional at this point. That will change as funds get bigger, longer track records are established, and successful exits accumulate. The growing acknowledgement of significant links between the oceans and broader climate challenges will also help bring existing climate investors to the table.
The importance of rigorous tools and frameworks cannot be overstated, which is why the high quality of the work referenced above is encouraging. Using science and metrics whenever possible, informed by reliable data and in collaboration with subject matter experts, will help build credibility in the ocean investment space.
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