It’s not an exaggeration to say that the fate of the world rests on the health of our oceans. This makes it critically important we protect and sustainably manage this vital life source.
Into the blue
Popular films like Blue Planet II and Plastic Oceans have shone a much-needed light on the plight of our oceans, but many may still be unaware of their vast impact. Not only are they the planet’s life support, providing food and water to billions, but they’re also central to regulating the climate too.
For instance, oceans absorb around 23% of annual CO2 emissions, just behind plants and vegetation – dubbed the ‘carbon sink’ – at around 29%.3 Yet they absorb more than 90% of the excess heat in the climate system, making them far more significant when it comes to overall temperature control.4
As with the warming on land, though, the heating of the world’s oceans has left a devastating toll. Over the past 30 years, surface temperate of the oceans has been consistently higher than at any time on record. And with more than half of the oceans now logging temperatures once considered extreme, countless species are under threat.5
Warmer water also vaporises more quickly, fuelling stronger and more frequent storms. Already this is having serious consequences: the average annual cost of US weather and climate disasters was $160 billion in 2021, an eightfold increase on the costs seen in the 1980s and 1990s.6 Much of this is a result of hurricanes, such as the recent Hurricane Ian, which was the fifth strongest to make landfall in the US and is set to cost insurers between $42billion and $57 billion in losses.7
Worse still, a warmer ocean will become more prone to releasing carbon dioxide back into the atmosphere. This threatens to warm the world anew in a vicious cycle, or ‘doom loop’, that may make it impossible to turn back the clock when it comes to taking climate action.
“Extreme climate change is [already] here,” warns Kyle Van Houtan, a research scientist at Duke University. “It’s in the ocean, and the ocean underpins all life on Earth.”8
Meanwhile, human activity has also wreaked havoc when it comes to pollution (especially plastics), acidification, overfishing, and even oxygen depletion – a particularly troubling development given oceans produce 50% of the world’s oxygen.9
“To continue along this path not only threatens marine ecosystems, but also the future ability of the ocean to indirectly support life,” says Live Ocean, a conservation charity. “The ocean is not only a victim of climate change, it is also a vital part of the solution.”10
Harnessing the ocean’s potential
The world is gradually waking up to the need to protect our oceans. Conserving and sustainably using the oceans was a key 2030 Sustainable Development Goal (Goal 14) in 2015. And governments, multilateral development banks, NGOs and philanthropists are boosting their commitments, aware that the ocean is a key ally in tackling the many planetary crises we face.
Yet far more needs to be done: a 2020 study, for example, estimates that $174.5 billion in funding per year is needed if the world is to have any chance of reaching the UN’s “Life Below Water” sustainable development goal by 2030.11
Progress has been painfully slow so far. Of all the Sustainable Development Goals, SDG 14 is by far the least funded, enjoying just 0.01% of all SDG funding from development finance up until 2019, and only 0.56% of all philanthropic funding since 2016.12 As the Economist puts it, ‘ocean conservation, research and sustainable development are alarmingly underfunded worldwide... The lack of investment in the ocean is self-evident and truly concerning.’
Clearly, governments and public groups can certainly do more. But the private sector has a role to play too, and a range of different market-based opportunities are emerging to help bridge the gap, with offerings across the entire blue economy. These include aquaculture and fisheries, renewable energy, sustainable shipping, pollution management, ocean technologies and sustainable tourism.
For investors, meanwhile, there’s no shortage of options – depending on your goals. While still in their infancy, there are more than a dozen specialist public and private equity ocean impact funds, designed to give investors a chance to be part of the solution – while funnelling much-needed capital into the space. Most of these funds are extremely niche and invest in – or even seed – companies and start-ups that are positively impacting overall ocean health.
Major strides are also being made in fixed income, where so-called ‘blue bonds’ are beginning to make waves. Like their more established green bond counterparts, blue bonds are debt instruments used to support investments in various blue economy projects, including sustainable fishing, ports and shipping, tourism, renewable energy, waste management, and biodiversity.
Belize and the Seychelles have both issued successful blue bonds, while Indonesia recently launched its own offering.13 Others are likely to follow suit.
Encouragingly, too, recent deals have increased in size, while a blue bond incubator should spur more origination going forward. Some predict it’s only matter of time before corporate blue bonds are launched as well, opening the door to more opportunities for investors.14
For now, investing in blue bonds is mostly limited to specialist green or sustainable bond funds. Yet as the market grows, it isn’t unthinkable that it could follow in the footsteps of the burgeoning and highly successful green bond market, with specialist blue bond funds offered to investors.
Whatever happens, it’s clear investors have a major role to play in preserving and sustaining our oceans. Our largest habitat, and our strongest ally in the fight against climate change, humanity can ill-afford to take our oceans for granted.
Green conviction for your fixed income allocation.
- Acidification - Ocean acidification is the reduction in the pH of the Earth’s oceans. Its main cause is the absorption of carbon dioxide from the atmosphere. This, in turn, increases CO₂ concentrations in the ocean.
- Biodiversity – the variety of plant and animal life in the world or in a particular habitat. A high level of which is usually considered to be important and desirable.
- Blue Bond – A blue bond is a debt instrument that is issued to support investments in healthy oceans and blue economies.
- SDGs– The Sustainable Development Goals or Global Goals are a collection of 17 interlinked global goals designed to be a "shared blueprint for peace and prosperity for people and the planet, now and into the future".
2 Source: Unesco, https://ioc.unesco.org/topics/biodiversity
3 Source: The Conversation, https://theconversation.com/yes-more-carbon-dioxide-in-the-atmosphere-helps-plants-grow-but-its-no-excuse-to-downplay-climate-change-130603
4 Source: NASA, https://climate.nasa.gov/vital-signs/ocean-heat/
5 Source: National Geographic, https://www.nationalgeographic.com/environment/article/ocean-threats
6 Source: NCEI, https://www.ncei.noaa.gov/access/billions/time-series
7 Source: Insurance Journal, https://www.insurancejournal.com/news/national/2022/10/03/688040.htm
8 Source: The Guardian, https://www.theguardian.com/environment/2022/feb/01/extreme-heat-oceans-passed-point-of-no-return-high-temperatures-wildlife-seas
9 Source: United Nations, https://www.un.org/sustainabledevelopment/wp-content/uploads/2017/11/Report-on-Climate-Partnerships-for-a-Sustainable-Future.pdf
10 Source: Live Ocean, https://liveocean.com/journal/a-healthy-ocean-is-our-best-ally/
11 Source: Ensia, https://ensia.com/notable/ocean-sustainable-development/
12 Source: The Economist, https://ocean.economist.com/blue-finance/articles/why-we-need-to-tackle-the-ocean-funding-crisis
13 Source: World Bank, https://www.worldbank.org/en/news/feature/2022/07/21/indonesia-s-first-sustainability-bond-by-a-non-bank-financial-institution-focuses-on-green-and-inclusive-development
14 Source: World Economic Forum, https://www.weforum.org/agenda/2022/09/sustainable-ocean-investing-goes-mainstream/