The blue economy needs to be translated into language financial institutions understand, according to investors.
Institutional investors have called for an increase in the number and scale of viable investment products targeting the blue economy to attract the private finance needed to protect oceans from the climate and nature crises.
Speaking at the ‘Financing the Growth of the Blue Economy’ event hosted by law firm Simmons & Simmons on 7 June, investors acknowledged that the UN Sustainable Development Goal (SDG) 14 – life below water – remains severely underinvested but cited their responsibility as fiduciaries, arguing that any prospective investment needs to “make sense” for their beneficiaries.
The ocean economy is estimated to be worth US$2.5 trillion annually but attracted just US$13 billion in sustainable investment over the past decade; achieving SDG 14 will require US$174.5 billion of investment a year until 2030.
“We are starting to see a blue rush, as financial institutions become more interested in investing in the blue economy,” said Chris Gorell Barnes, Founding Partner at impact investment firm Ocean 14 Capital.
“The issue is that there are not enough vehicles of institutional quality to attract enough investment. For that, the language we’re using needs to change”
Gorell Barnes added that institutional investors are not interested in “profit, plans and purpose, but are focused on risk, regulation and returns”.
My-Linh Ngo, Head of ESG Investment at BlueBay Asset Management, agreed, noting that “framing nature loss and climate change as systemic risks to institutional investors is really pivotal”.
Ocean 14 Capital’s US$150 million growth-stage private equity impact fund, which is labelled as Article 9 under the EU’s Sustainable Finance Disclosure Regulation (SFDR), is targeting investment opportunities that are contributing to a reduction in marine pollution, protecting and restoring ocean ecosystems, reducing ocean acidification, and addressing overfishing.
One size doesn’t fit all
The size of blue economy investment products is also a factor for institutional investors, said Ngo.
“It has to be large enough for us to invest in – hundreds of millions, at least.”
David Thompson, Chief Investing Officer at Zurich Insurance, added that the insurer’s current investments in ocean solutions typically form part of a broader strategy targeting nature-based solutions (NbS).
“Ocean investments are still very niche, so we allocate to NbS opportunities which will finance ocean-based solutions as part of that,” he said.
Organisations like the Ocean Risk and Resilience Action Alliance (ORRAA) are attempting to build out and de-risk the investable pipeline across the blue economy. The alliance has previously secured multi-year investment commitments from the US, Canadian and UK governments to build ocean resilience, targeting projects such as bolstering the financial resilience of small-scale fishing communities with data, traceability and market platforms.
Ngo added that the blue economy also needs to think “beyond equities” to other asset classes like fixed income, pointing out that the sheer size of the debt market offers significant potential to rapidly upscale the blue economy.
Increasing global regulatory and policy cohesion is contributing to institutional investors’ growing interest in the blue economy, panellists said.
They pointed to the inclusion of oceans in discussions at COP26 and COP27, with the latter issuing a commitment to protect coastal zones and oceans from the physical impacts of climate change. Further, governments agreeing on the Global Biodiversity Framework and High Seas Treaty has also provided increasing certainty that the blue economy requires investment to support the realisation of these international goals.
Chip Cunliffe, ORRAA’s Programme and Risk Director, said: “We’re still ten to 15 years behind where we need to be in terms of understanding how to utilise [private] investors in the blue space.”
He added that, with their longer time horizons, institutional investors are nonetheless increasingly aware that business-as-usual 30 years from now will lead to unstable ecosystems and an uncertain future for the next generation.
