The ocean or the global “blue economy” contributes US$2.5 trillion ($3.8 trillion) a year in economic output – equivalent to world’s seventh-largest economy by GDP – and is expected to expand at twice the rate of the mainstream economy, reaching US$3 trillion a year by 2030.
The ocean covers three quarters of the Earth’s surface, providing food, energy, transport and recreation as well as hosting a major portion of the planet’s biodiversity. It plays a vital role in regulating the water and carbon cycles, absorbing around 25 per cent of carbon dioxide, while producing half the oxygen we breathe.
The largest ocean economy sectors include offshore oil and gas, maritime and coastal tourism, maritime equipment and ports. The largest employers are industrial capture fisheries with over one-third of the total, and maritime and coastal tourism with almost one-quarter. Strong growth is expected this decade in marine aquaculture, offshore wind, fish processing, and shipbuilding and repair. In 2030, the ocean economy is anticipated to be responsible for 40 million full-time equivalent jobs.
Highlights include aquaculture which produces half of the world’s seafood. Fisheries and aquaculture provide direct or indirect employment to 10-12 per cent of the world’s population, with more than 90 per cent of those employed located in developing countries. Some 90 per cent of international trade is delivered through over 50,000 merchant ships and 98 per cent of international telecommunications, carried on more than 1.2 million kilometres of submarine cables
Human impact
However, human use of ocean space and resources is affecting ocean health and sustainability. Often, the effects of sea-based activities are also accompanied by much more significant land-based sources of impacts, such as municipal wastes, agricultural runoff and plastics.
Some of the major challenges facing our oceans include climate change with warmer oceans, rising seas levels, bigger seas and cyclonic activity and moving fisheries. Ocean pollution is another challenge from plastics, and microplastics, waste run off and ocean dumping as well as noise pollution from shipping. Overfishing and illegal, unregulated and unreported fishing is another key issue with some 80 per cent of fisheries at risk of being overfished.
The shipping industry produces approximately three per cent of global greenhouse gases, and this continues to rise with growing economic activity. Traditionally cheaper bunker fuels are used on ships, but rules via the International Maritime Organisation are tightening.
Much of modern slavery takes place on ships and ports across the world, but in particular in developing countries and regions where regulation, monitoring and controls are often weaker. The overuse and coastal development, pollution, climate change is contributing to significant biodiversity loss in oceans as witnessed in the Great Barrier Reef. Solutions to many of these issues are starting to be addressed by global bodies and leading companies.
Investment opportunities
For such a significant component of the planet and the global economy and with the impacts and threats to its future, the ocean is under-invested. Of the 17 UN Sustainable Development Goals, SDG14 on the conservation and sustainable use of the ocean attracts only 3.5 percent of global investment.
Achieving a balance between “blue growth”, jobs, and a healthy marine environment will largely be based on addressing the opportunities and challenges faced by the diverse and extensive, existing ocean activities. Existing kinds of ocean uses are expanding in intensity, duration, and geography. New ocean uses will be coming into effect in the next few years and decades including offshore renewable energy, decarbonisation, carbon dioxide sequestration and marine genetic resources use.
This creates a compelling investment case for finance and innovation by impact entrepreneurs and investors. One area that could hold great potential for improving ocean sustainability is technology. While emerging areas such as renewable energy are technologically advanced, there is a lot of potential in areas such as fisheries, aquaculture, shipping and tourism.
Whilst strengthening legislation and regulations are critical for healthier oceans, key areas for investment include:
- Shipping decarbonisation – boat/ship electrification and redesign, biofouling reduction, alternative fuels such as hydrogen and methanol
- Sustainable aquaculture – fish, bi-values (oyster, mussels) and plant based (seaweeds and algae)
- Renewable energy – offshore wind farms, wave energy, and local waste to energy
- Waste and plastic reduction solutions
- Natural capital solutions – blue carbon (protection and regenerations of biodiversity (mangroves and saltmarshes).
- Resilience defensive infrastructure such as sustainable seawalls
- Technology – ocean robotics and drones, ocean sensors and data collection
The investments are available across asset classes, from start-up equity and debt all the way to global listed equities and bonds. Investors also range from global asset owners and their asset managers to the angel investors in oceans start-ups. There are now numerous ocean incubators and accelerator popping up across the globe, some in developing countries, and many in Europe and the US.
The European Investment Bank and many other foreign direct investors are supporting blue economy investment, with noted high activity in Norway, Spain and Portugal. To further develop the blue economy early-stage investments, a combination of different types of sustainable finance are being used, including philanthropic grants, investor supporting capital, impact investment, loans and blue bond issuances.
The World Ocean Council’s Ocean Investment Platform is a global initiative that links ocean industries, innovators, and investors to accelerate investment in ocean sustainable development. This includes the Ocean Investor Roundtable, which brings together the growing number of funds dedicated to investing in ocean sustainable development opportunities. There is also the Global Blue Economy Innovation Initiatives Network which connects the around 100 ocean-sustainability related accelerators, incubators, challenge competitions and startup hubs.
Michael van Niekerk is chief impact officer at NorthStar Impact Funds.
