More than a notion

The WorldBank defines the blue economy as the sustainable use of ocean resourcesfor economic growth, improved livelihoods and jobs, and marine and coastalecosystem health.

Source: Whatis the Blue Economy? (worldbank.org)

Awareness of the challenges and opportunities of the blueeconomy has broadened in recent years. One challenge is to find the rightbalance between improving peoples living standards by drawing upon the richesof the marine environment and preserving the seas and oceans.

In Principles for aSustainable Blue Economy, the World Wide Fund (WWF) for Nature, the largestnature conservation organisation in the world, seesa role for the blue economy in contributing to foodsecurity and the eradication of poverty, and providing income, employment, andpolitical stability. A responsible approach restores, protects and maintainsthe diversity,productivity, and resilience of this naturalcapital. A blue economy is based on clean technologies, renewable energy,and circular material flows, according to the WWF.

Seas and oceans are a unique natural capital.

Given the role of the oceans and seas in regulating theclimate effectively, acting as a reservoir of biodiversity and a trove ofeconomic resources, their protection would seem essential. Yet, the marineenvironment is facing serious threats from both land and maritime-basedactivities.

Ocean warming and the increase in carbon dioxide in theatmosphere are resulting in the acidification of oceans. This keeps the shellsof many marine organisms from hardening and reduces their survival rate.Overfishing is reducing fish stocks and unregulated and undeclared fishinghampers their ability to rebuild numbers.

Eighty percent of marine pollution originates on land. Eightmillion tonnes of plastic end up in the ocean every year and if businesscontinues as usual, we face a future with more plastic in the ocean than fishby 2050. The plastic plague affects ocean life. In the case of oysters aspecies that provides an indication of ocean health plastic particlesresulting from the fragmentation of waste havebeen found to damage their reproduction cycle. Microplastics are found notjust in seafood. They are omnipresentin the environment, including the human food chain.

The declining health and biodiversity of marine ecosystemsmake it even more urgent to step up efforts to reduce emissions of pollutantsand the disposal of dangerous substances. As land-based natural resources arebeing depleted, it is incumbent on us not to exhaust those found in marine andocean areas. That includes the as yet untouched resources of the oceans, seasand coasts.

New sectors are emerging beyond traditional activitiessuch as fishing, aquaculture, ship and port construction, passenger and cargotransport, port operations, and tourism.

The new sectors have strong growth potential and willcreate jobs and require new skills. For example, renewable marine energysources can play an important role in a world that is both hungry for energyand keen to see sustainable cuts in greenhouse gas emissions. They include windenergy, and tidal and wave power devices. Improvements in the energy efficiencyof ships and switching to less carbon-intensive energy sources are otheraspects of blue economy development.

A further area is marine biotechnology, with applicationsin pharmaceuticals and cosmetics. There is the considerable task of wastemanagement given the impact of land pollution on the seas. That includes theprevention of marine waste.

Finance can play a major role in the energy transition andpush companies linked to the blue economy to adopt better practices. Thoseinvestors who consider the preservation of marine resources as an absolutepriority are set to see investment opportunities in companies that developmarine and ocean projects opening up as awareness of the blue economys appealgrows.

This particular area already has its own index: the ECPI Global ESG Blue Economy index. It comprises 50 companies whose activities are related to the blue economy. It includes five categories: coastal livelihood (protection, eco-tourism), energy & resources (offshore wind, marine biotech, wave & tidal), fisheries & seafood, pollution reduction (recycling/waste management, environmental services) and maritime transport. [3]

Also read:

Howocean states can benefit from a blue recovery from COVID-19

Water:a pervasive resource and a portfolio staple

Read more about sustainable investing

[1] The above points are based on data from National Geographic 28 February 2018; European Union 2017/ourocean2017; ocean-climate.org; Maritime transport study 2018, United Nations/UNCTAD; Ifad.org/15 January 2019

[2] The above points are based on data from https://wwfeu.awsassets.panda.org/downloads/wwf_marine_briefing_principles_blue_economy.pdf

[3] Click here for more information

Any views expressedhere are those of the author as of the date of publication, are based onavailable information, and are subject to change without notice. Individualportfolio management teams may hold different views and may take differentinvestment decisions for different clients. This document does not constituteinvestment advice.

The value ofinvestments and the income they generate may go down as well as up and it ispossible that investors will not recover their initial outlay. Past performanceis no guarantee for future returns.

Investing in emergingmarkets, or specialised or restricted sectors is likely to be subject to ahigher-than-average volatility due to a high degree of concentration, greateruncertainty because less information is available, there is less liquidity ordue to greater sensitivity to changes in market conditions (social, politicaland economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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