Banking

Investors missing out on blue economy opportunities but tide is changing

But asset managers are starting to see it as a rising investment theme that provides a “golden opportunity” to be explored.

According to a report by Credit Suisse, almost a third (28%) of investors are failing to address sustainable blue economy themes – a term used to describe commercial activity on the oceans, seas and coasts – in their investment portfolios.

The Investors and Blue Economy Credit Suisse report also revealed that while the economic value of global ocean assets is around $24trn, making it the seventh-largest economy in the world, it has been shunned by investors.

“The blue economy has been largely overlooked, with access to the space providing a significant challenge for investors in recent past,” Rob Lambert, senior corporate analyst, investment grade at BlueBay Asset Management, told Investment Week.

Asset managers are now working to convince investors that what is good for the ocean may also be good for business.

Ocean of opportunities

“The great thing about the blue economy is that all the opportunities are aligned with important drivers such as profitability and social impact,” said Ben Rotheray, managing director of The Value Engine and a member of FANBEST, the Funding Atlantic Network for Blue Economy Technology Transfer.

“Entrepreneurs are developing solutions that tackle real problems and there is a great opportunity for investors to come in and bank on those,” he added.

Companies in the blue economy are determined to show that ocean conservation, sustainable fishing and carbon sequestration can be good for business, especially as global shipping, aquaculture and the appetite for sustainable solutions increase around the world.

While most of the discussion in the finance industry has been about green, some investors are starting to look for blue as marine resources become increasingly important in tackling climate change.

Oceans absorb 93% of climate heat and sequester 25% of global carbon dioxide emissions, making them a key instrument in climate change mitigation. 

Some companies are growing kelp, with the goal of producing enough of this seaweed to pull carbon dioxide from the atmosphere and permanently sequester it by burying it on the ocean floor, and sell the carbon offsets.

Increasing numbers of private and institutional investors are keen to support companies that are already good stewards of the ocean, but obstacles remain.

“The first issue is the awareness level around the blue economy,” Rotheray said. “There is a golden opportunity for investors to support those businesses who play a key role in helping to conserve our oceanic resources – we just need to make that opportunity more accessible and understandable,” he added.

Banking on blue

An instrument that has shined a light no the plight of small island developing states in the face of climate change are so-called blue bonds.

While still relatively rare, they are emerging as an innovative financial solution to mobilise capital and create sustainable business opportunities in ocean and freshwater conservancy.

The Seychelles issued the first blue bond in 2018 — so named because the aim is to support marine and fisheries projects.

The island nation raised $15m from investors, including Calvert Impact Capital and Nuveen. 

“The Seychelles’ success in protecting an ocean area larger than the size of Germany means it has already tripled the UN’s Sustainable Development Goal of protecting 10% of coastal areas,” Giancarlo Perasso, lead economist, Africa and former Soviet Union, at PGIM Fixed Income, said.

“The blue economy will represent an increasingly meaningful opportunity in the fixed income sector, specifically the ESG labelled bond market,” added BlueBay’s Lambert.

Global sales of green bonds, including blue carbon bonds, have soared over the past five years, with $233bn worth sold in 2020, a 13% jump over the previous year, according to data from Bloomberg.

“We are seeing the emergence of blue bonds (…) this is an area set for expansion given the focus on delivering the UN’s 17 Sustainable Development Goals, alongside impact investing, climate change and the need for the nature-based solutions,” Lambert said.

Fiji plans to issue a sovereign blue bond in 2022 to raise up to $100m for investments to deliver a sustainable blue economy, create jobs and protect Fiji’s ocean and biodiversity.

“There is an opportunity to make money but also do a lot of planetary good as the ocean covers 70% of the surface of our world,” Rotheray said.

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