In a fast changing world, our focus is on achieving long-term sustainable investment returns for our clients.
Investing in ocean health offers coastal countries the means to recover from the pandemic in a sustainable and economically efficient manner.
There has been much talk of the importance of a ‘green recovery’, with leading economists suggesting sustainable investment is the most effective means of stimulating economies emerging from the pandemic.
Green investment strategies enacted at this time would not just create new jobs in low-carbon industries, but, if implemented effectively, would also have a material effect on the world’s greenhouse gas emissions trajectory. A recent study indicates even relatively modest green recovery investment would avoid 0.3C of warming by 2050.
Ocean states, however, have further opportunities. Investing in sustainable ‘blue economy’ activities, as the High Level Panel for a Sustainable Ocean Economy has recently outlined, would also be an economically efficient means of recovery – and one that would tackle climate change as well as the health of the oceans. Such investments could include putting capital towards ending overfishing, restoring mangroves, building offshore wind turbine facilities and decarbonising shipping.
Offshore wind power generation can offer one of the more fruitful investment opportunities for both ocean-oriented and energy investors, with the High Level Panel estimating returns of USD 17 on every dollar spent under the right conditions (see Exhibit 1).
Exhibit 1: Benefit-cost ratios across nature and energy-based ocean activities over a 30-year time horizon
Source: High Level Panel for a Sustainable Ocean Economy
As the technology continues to scale up, with gigawatt-sized offshore wind farms, individual turbines generating more than 10 megawatts and capacity factors that are higher than onshore equivalents, offshore wind is becoming a subsidy-free industry that could outcompete fossil fuel-based generation within the next few years.
As the industry spreads beyond its European roots into US and Asian markets, technological advancements such as floating foundations are allowing power generation in deeper waters with more favourable wind conditions. With a strong development pipeline, this large-scale low-carbon technology is becoming a backbone of power grid decarbonization.
When it comes to shipping, there are abundant opportunities to boost sustainability. The International Maritime Organization (IMO) has set a target for the sector to cut its emissions to 50% of 2008 levels by 2050. Stakeholders have said this is not ambitious enough to meet Paris Agreement goals. The goal will be difficult to achieve as the technology needed to get there does not yet exist at scale. As shipping assets have a lifetime of around 25 years, ships being chartered this decade may still be operating in 2050, highlighting the need for immediate action.
Short-term solutions include using sails to aid efficiency and decreasing ship speeds. However, in the longer term, sustainable fuels will have a significant role to play. While the industry has partly looked to fuel switching to comply with the IMO’s sulphur regulations, low-carbon synthetic fuels that rely on watch our video on green hydrogen – synthesised using electrolysis powered by renewable energy – will be crucial.
Developing such fuels ties in with the significant interest in hydrogen as part of green recovery efforts in the EU. The bloc is also planning to add shipping into its emissions trading system, with the revenue generated earmarked for a fund to aid ocean recovery.
Reforming subsidies to end overfishing and investment in sustainable aquaculture are estimated to generate benefits of USD 6.7 trillion over the next 30 years, or around USD 10 for every dollar spent, according to the High Level Panel.
Overfishing and unsustainable fishing techniques add to a long list of marine ecosystem pressures that include the not-yet-fully-understood effects of plastics and microplastics in the ocean.
One way to address this is through reforming fishing policies. Investing in sustainability in the aquaculture industry is another area in which seafood can be harvested in an environmentally friendly manner. Technological innovations being developed include utilising blockchain to trace fish, employing AI monitoring systems, and co-locating aquaculture and seaweed farms at offshore wind sites.
From a livestock feed perspective, research is underway to turn waste CO2 into powdered proteins for salmon, and – moving beyond the ocean – seaweed is being experimented with as a cattle feed alternative to reduce livestock methane emissions. Seaweed is also being investigated as an alternative feedstock for biofuel production, avoiding land use issues associated with conventional biofuels.
Restoring mangroves can create jobs and economic returns, but the ecosystem’s high carbon sequestration potential also means it can be an effective nature-based solution to draw carbon from the atmosphere. Mangroves also act as feeding grounds and nurseries for various species and stabilise shorelines against flooding and extreme weather.
As such, some companies have focused on restoring mangroves for carbon-offsetting purposes, though care is needed as complex carbon flows and land use change considerations could affect carbon savings. Payments for ecosystems and carbon resilience payments that involve guardianship from local stakeholders could be a sustainable form of corporate action in this area.
Commentators have pointed to the opportunities a ‘green-blue’ recovery can bring. In the US, the Ocean Climate Action Plan has outlined a ‘Blue New Deal’ designed to improve ocean health while generating prosperity, addressing inequality and tackling climate change. The EU’s Blue Economy Report highlights the sector’s importance and potential contribution to the bloc’s green recovery plans.
The Economist Group’s World Ocean Initiative points to the substantial level of ‘blue finance’ needed to build offshore wind farms, transition to greener shipping and restore coastal ecosystems. While there is investor interest in financing ocean sustainability, a lack of understanding of blue finance risks and opportunities are hindering efforts to redirect existing capital and attract new private finance is, it says.
Despite all this attention, government coronavirus stimulus packages worldwide are still heavily focused on fossil fuel. Analysis indicates that only 1% of approved stimulus spending is supporting sustainability or climate-friendly initiatives. With international talks on hold, and the window of opportunity for action on ocean health narrowing, touting the economic benefits of a blue recovery could help to turn the tide.
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