As the spotlight grows on the current climate emergency, so does global interest in finding solutions to improve the position humanity has found itself in. Investors are uniquely placed to contribute towards solutions through exploring and investing in ethical, sustainable and responsible investments.
The 7th largest economy (based on gross product) is the world's oceans, the so called 'Blue Economy'. Once defined only as the wealth and resources with which the ocean provides the world, many definitions now include sustainable management and development of these resources. The 2015 UN Sustainable Development Goals (SDGs) dedicate one of its 17 goals to 'life below water'; to "conserve and sustainably use the oceans, seas and marine resources for sustainable development". The Blue Economy's estimated value is currently around $24 trillion, but predictions are that this value will double by 2030. Furthermore, as two thirds of the economic value is produced by assets relying on a healthy ocean, the question is - how can investments be made in the Blue Economy that contribute to SDG goal 14?
The Sustainable Blue Economy Finance Principles
Presented to international audiences in 2018, including at the World Ocean Summit and the Our Ocean Conference, the World Wide Fund for Nature (WWF) showcased its set of 14 voluntary principles in collaboration with the Prince of Wales's International Sustainability Unit, the European Commission and the European Investment Bank. Aimed at every investor, regardless of the size of the investment, the principles align with SDG Goal 14 and comply with IFC Performance Standards and the EIB Environmental and Social Principles and Standards.
The first 7 principles focus on achieving sustainable investments:
- Protective - support investments, activities and projects which take measures to restore, protect or maintain the overall health of marine ecosystems and the dependent livelihoods and communities
- Compliant - support investments, activities and projects that comply with laws and relevant frameworks
- Risk-aware - base investment decisions on assessments which account for economic, social and environmental values, risks and impacts
- Systematic - identify the systematic and cumulative impacts of investments, activities and projects across value chains
- Inclusive - support investments, activities and projects that support local livelihoods, engage with stakeholders and mitigate issues arising from affected parties
- Cooperative - cooperate with other financial institutions and stakeholders to promote and implement the principles
- Transparent - make information available on investments and report on progress
The remaining 7 are specific to the Blue Economy:
- Purposeful - direct investments that contribute directly to SDG Goal 14
- Impactful - support investments that go beyond the avoidance of harm to provide social, environmental and economic benefits for current and future generations
- Precautionary - support investments that have assessed the impacts of activities based on sound scientific evidence
- Diversified - recognise the importance of small to medium enterprises in the Blue Economy
- Solution-Driven - direct investments to innovative commercial solutions to maritime issues
- Partnering - partner with relevant organisations and entities to accelerate positive progress
- Science-led - actively seek to develop science-led knowledge on the impacts and risks of investments
The principles are predicted to become "the gold standard" for investing in the blue economy and international organisations who produced, supported and endorsed the principles have raised the general profile of not just the importance of a healthy blue economy, but the economic opportunities that are presented by sustainable investments.
What Happens Next?
The United Nations Environment Programme (UNEP) Finance Initiative is using the 14 principles to form part of a new sustainable blue economy finance initiative, expected to be launched in 2019. Building on the principles, UNEP commits to using a wide range of interest groups including banks, insurers and investors in working groups in order to complete a comprehensive understanding on what the requirements are for the initiative to be a useful and successful tool. Furthermore, to transform principles into practice, an IT-based tool is reportedly being developed to help investors decide on the sustainability of asset decisions. Erik Solheim, Head of UN Environment, has said "this collaborative initiative to finance a sustainable blue economy is not only timely and complementary - it is absolutely urgent and necessary".
Could this 'Gold Standard' become just 'The Standard'?
With the predictions that the ocean economy is set to double between now and 2030 and the majority of that value relying on healthy oceans, the tensions between sustainability and profitability become ever more apparent. The need to balance livelihoods that rely on a healthy ocean with restoring ocean habitats is a complex task, similar to the issues around 'just' transitions that have occupied the fossil fuel divestment movement. The first 7 principles of the Sustainable Blue Economy Finance Principles are aimed at finding this balance with regards to investments.
The principles aim to support oceans and capitalise on them, and so therefore rely on the health of the oceans long-term. Considering the possibility of the ocean ecosystem suffering irreversible damage, investor interest may naturally want to shift from sustainable investments to survivable investments (ones that will survive ocean damage). There is also the problem of something sustainable becoming unsustainable, such as the debate surrounding 'sustainably managed' fisheries supporting unsustainable levels of consumption. How easily could this happen with investments in the Blue Economy?
There are also the broader problems concerning mitigation and adaptation due to climate change and the need for regeneration and restoration of many ecosystems. These concerns will need to be addressed through the last 7 principles, which specifically focus on the Blue Economy. It is going to be especially important to incorporate a science-based approach led by relevant organisations in order for investors to understand the intricate balance of the Blue Economy.
Other initiatives are happening as well. NatureVest, for example, the investing unit of The Nature Conservancy, is aiming to raise $1 billion of investment capital by 2021 for the sole purpose of conservation. One of its projects focuses on ocean protection, working to restructure debt in exchange for governmental commitments for marine conservation and climate adaption. This project has been carried out in the Seychelles, where the debt restructuring has enabled implementation of a Marine Spatial Plan and has ensured the protection of 40 million hectares of water as a marine protected area.
It is promising to see the current and predicted development of tools to enable investment decisions align with SDG Goal 14 and the support of the Blue Economy as a sustainable ecosystem. The complexities of the ocean means that a combination of knowledge is needed from both an investment perspective and from a scientific, research driven and information sharing perspective, as can be seen from the split of the Sustainable Blue Economy Finance Principles. The Blue Economy has incredible growth potential and is an exciting area for investment, but this is going to depend heavily on the overall health of the one connected ocean and the wider Blue Planet.