How sustainable financing can help protect and manage the ocean in the long-term
The ocean is the backbone to many critical economic and societal functions, including shipping, food source and even as a provider of energy via offshore and tidal renewable energy. Its industries contribute an estimated USD 1.5 trillion (2.5% of global GVA) and provide the primary livelihood to many coastal communities. (1) However, the ocean system is at great risk due to climate change, vast amounts of marine litter, pollution from sea and land activities, overfishing and unsustainable urban developments of coastal regions.
These risks affect marine resources and lead to the acidification of its waters. Rapid acidification destroys critical ecosystems such as coral reefs and will negatively impact the ocean’s ability to provide fish and seafood as a source of protein in 20 to 30 years.
In addition, if current trends persist, there will be 1 ton of plastic waste in the ocean for every 3 tons of fish by 2025. (2) Plastic waste poses a great risk of contaminating the food system, which could abolish entire marine-related economic sectors and their underlying jobs. This would be disastrous especially for communities in developing countries where livelihoods often depend on sea-based activities. Marine litter is already generating costs and lost revenues in sectors like fishing, aquaculture, tourism and government estimated at almost USD 13 billion a year (3). Therefore, measures to protect and manage the ocean as a resource in the long-term are needed.
One of the ways to achieve this is through sustainable finance that promotes the responsible use of ocean while generating financial value for shareholders. Governments and businesses have increasingly recognized that the preservation of our resources and habitats is directly correlated to the financial value it brings to shareholders. Global sustainable finance has been a reality for many years now with direct impact on consumers’ choices and employee satisfaction. Most recently, there has been increased attention paid to oceans as an area of major potential for environmentally-conscious investment. If the ocean were a country, it would be the 7th largest economy in the world with a GDP valued at USD $2.5 trillion a year.
As we collectively battle the effects of COVID-19, our current oceanic economy has also seen a large pandemic-fueled dip, with maritime shipping activity decreasing close to 30% in some regions and fishing activity declining as much as 80% in China and West Africa. (4) However, as the ocean economy, and indeed our entire economy rebounds, it is important to ensure that new and responsible ways of doing business are fueled by innovations in sustainable financing. If we are to harness the ocean’s vast potential and preserve its biodiversity, a multi-stakeholder approach and international cooperation between governments and the financial sector are required.
For example, the end of 2019 saw the world’s first investment fund – which raised USD $106MM – focused on addressing Asia’s plastic crisis. The fund’s objective is to help incubate and finance small and mid-size enterprises (SMEs) and start-ups that effectively treat waste and prevent plastic from entering the ocean and impacting marine life. The fund aims to prove that investment in ocean plastic solutions can provide substantial financial returns and believes it can unlock billions of dollars from public and private institutional investors with this promise, once again showing shareholder value and climate action can be not only compatible, but intertwined.
Unfortunately, a few key challenges exist that prevent immediate oceanic investment, with a funding gap being one of the most prominent of these challenges. When it comes to combating ocean pollution, for example, research estimates there is a financing shortage among the top five plastic polluting countries for plastic waste collection of between $28 – $40 per metric ton, for a total of USD $5 billion investment gap per year. ‘Blue bonds’ provide one way to address this. Blue bonds are innovative, fixed-income financial instruments that are specifically designated to raise money for projects deemed ocean-friendly. Such bonds can be a great vehicle to support less developed countries in financing projects aimed at addressing marine-related crises, thereby contributing to a more sustainable ocean system and advancing the blue economy.
This is just one example, as other critical issues including unregulated fishing, climate change, and the decrease of biodiversity also pose critical threats to realizing the long-term potential of oceans as sources of sustainable investment.
As we address these key challenges, we can also fund new technologies, incentivize innovation and entrepreneurial ideas, and overall accelerate the transition to a circular economy that intakes old plastic and reinvents it into a resource for future materials for an environmentally and financially sustainable future. These innovations, among others that make physical infrastructure more resilient to climate change, will allow us to restore our oceans, sustainably enjoy its benefits, and continue to uphold its economic importance.(5)
Mr. Mohammad Abunayyan is Chair of the Energy, Sustainability and Climate Taskforce and Chairman of the International Company for Water and Power Projects.
(1) OECD, The Ocean Economy in 2030, 2016. (2) The Guardian, More plastic than fish in the sea by 2050, 2016. (3) UN, UNEP Yearbook, 2014. (4) Douglas McCauley, et al., “8 ways to rebuild a stronger ocean economy after COVID-19.” World Economic Forum, Jan, 2020. (5) Rob Kaplan, CEO Circulate Capital, “How venture capital can help stem the flow of ocean plastic waste,” World Economic Forum, Jan, 2020.