Asset Owners Urged to Jump into Deep End

The risks and impacts associated with ocean pollution and degradation are vast, but “easy wins” exist for investors. 

To sufficiently address the climate and nature crises, asset owners must prioritise the world’s oceans and marine life, according to new research. 

The paper makes the case that asset owners should look to understand the important role that oceans can play in combatting climate change and marine biodiversity loss. It also outlines recommendations on how they can incorporate ocean themes into their engagement and investment strategies. 

“Oceans remain an underrepresented issue, but an extremely important one,” said André Ranchin, research co-author and Investment Consultant and Biodiversity Lead at pensions and financial services consultancy Hymans Robertson.  

One of the most common barriers that have prevented many asset owners from taking action is the multiplicity of issues they are already expected to address. 

“A pension trustee needs to worry first and foremost about fiduciary duty to beneficiaries and how an investment strategy can deliver the best returns,” Ranchin explained. “There are several investment themes – let alone ESG – that are important, making it challenging to know which they should prioritise.”  

There is also a lack of visibility over negative harms taking place across oceans globally, which makes it seem like a more distant issue to asset owners compared to other subjects, such as deforestation. However, those who have made net zero commitments should identify and account for ocean and marine-related risks in their portfolios, Ranchin insisted. 

Given the sheer scope and range of potential risks that exist within marine ecosystems, the paper identifies specific themes that investors can incorporate into their ESG-focused strategies: pollution, overexploitation, climate change, and marine protected areas.  

Although the ocean economy is worth an estimated US$2.5 trillion annually, attracted just US$13 billion in sustainable investment over the past decade. 

Recent reports have shown that a minimum of US$175 billion a year will be needed between now and 2030 to achieve the UN SDG 14 on life below water, which aims to conserve and sustainably use the oceans, seas and marine resources for sustainable development. 

Governments’ recent agreements on the Global Biodiversity Framework and High Seas Treaty should go some way to provide asset owners with increasing certainty that investments in the blue economy are required to support the realisation of international goals.  

Keep it simple 

“Biodiversity and oceans are complex, multifaceted issues with many different risks to think about, but there are tangible actions investors can take now to start addressing them,” Ranchin argued. This is what he went on to develop in the paper.  

One of the recommendations he made is for asset owners to engage with investment managers and portfolio companies on marine biodiversity to better limit harmful impacts and understand portfolio dependencies on the ocean. Where possible, asset owners should also use their voting power, to encourage marine conservation and sustainable business practices across the blue economy.  

For asset owners interested in the blue economy and in mitigating marine and oceans-related risks, there are some “easy wins”, the paper mentioned. 

By way of example, asset owners can play an important role in reducing ocean pollution by making long-term investments in sewage infrastructure and engaging with water companies to reduce harmful sewage practices.  

There is also existing guidance to help institutional investors identify credible investment opportunities.  

Last year, the International Capital Market Association (ICMA), published guidance on blue-themed bonds, providing clear criteria, practices and examples for blue bond lending and issuances.  

Additionally, in 2018, the UN Environment Programme Finance Initiative developed the Sustainable Blue Economy Finance Principles. The principles aim to ensure that investment, underwriting and lending activities are aligned with the SDG 14, while further developing industry understanding of the potential risks and impacts associated with financial activities.  

“Ocean-related risks and impacts aren’t new, but what is now becoming apparent is the pace at which we are harming the ocean and how these threats are materialising and won’t go away unless action is taken,” said Ranchin.  

“There is a lot that investors can do to address this. Oceans can be one of the most impactful themes in their investment strategies.” 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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