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‘Blue Investment’ Stymied by Inconsistent Frameworks, Data

New financing mechanisms and tools needed to scale up investment in sustainable, climate-resilient ocean economy.

Large-scale investment in a sustainable ocean economy is being thwarted by a combination of capacity constraints, data challenges, regulatory gaps and low levels of transparency, according to a new report, ‘Ocean Finance: Financing the Transition to a Sustainable Ocean Economy’.

Commissioned by the High Level Panel for a Sustainable Ocean Economy, the report says public and private investment in the ocean economy is largely directed to unsustainable industrial fishing or offshore oil extraction activities which run counter to United Nations Sustainable Development Goal 14 on the conservation and sustainable use of oceans, seas and marine resources.

With the ocean economy already suffering from over-extraction, habitat damage, pollution and climate change, continuation of such ‘business-as-usual’ investments will pose “great risks to the health and integrity” of the oceans and their dependent populations, wrote the report’s authors, the co-chairs of the Ocean Panel Expert Group.

The ocean economy has been estimated to contribute US$1.5 trillion to the global economy, but it has received less than 1% of this amount through official development assistance and philanthropy over the past decade. To address this under-investment, the report calls the development and mobilisation of new forms of financing which empower local communities and support responsible business practices.

Report authors cite information gaps as a key barrier to Investment, claiming inadequate or missing data currently makes it hard to value potential investments or assess risks. They also point out that a lack of cohesion between existing standards and taxonomies hamper clarity and harmonisation on investments in a sustainable ocean economy. At the same time, subsidies totalling approximately US$£22 billion are supporting industrial fishing operations to the detriment of smaller-scale fishing activity and dependent coastal populations.

Among its recommendations, the report calls for new financing mechanisms and tools to scale up investment in sustainable and climate-resilient economic activities.

Proposed innovative financing solutions include tailored bond structures that pool together a basket of high-impact underlying borrowers into a single structure, as well as blue or climate bonds which meet specific investment criteria and accountability requirements. The report cites marine energy and water utilities sector criteria set by the Climate Bonds Initiative as well as the Blue Natural Capital Positive Impacts Framework.

Other options include debt-for-nature swaps whereby a portion of existing debt is restructured and converted into agreed-upon initiatives that address, for example, marine conservation, with the debtors then obliged to execute the initiatives. In addition, the report specified an important role for the insurance sector, in the removal the risk from ocean-benefitting activities and defund harmful activities.

In parallel, the report recommends the development of common guidelines and principles to define sustainable investment in the ocean economy, measures to strengthen understanding of ocean health and finance (especially in developing countries), a reconfiguring of tax incentives and subsidies, and a more stable regulatory and policy framework to incentivise investment.

“Widely adopted and clear principles; guiding frameworks and metrics; and proactive avoidance of financing illegal and harmful activities could redirect billions of dollars toward sustainable development pathways, creating long-term and positive systemic change,” wrote report co-authors Rashid Sumaila, Professor and Canada Research Chair in Ocean and Fisheries Economics at the University of British Columbia’s Institute for the Oceans, and Melissa Walsh, Blue Finance Specialist with the Asian Development Bank and principal at Marine Conservation Finance Consulting, in a blog for the World Resources Institute.

The High Level Panel for a Sustainable Ocean Economy is a coalition of 14 countries and backed by the UN Secretary General’s Special Envoy for the Ocean. The Ocean Panel, members of which include Australia, Canada, Japan, Indonesia, Mexico, Norway and Portugal, was formed in 2018 to support sustainable ocean economic growth based on effective protection, sustainable production and equitable prosperity.

 

 

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