One of the oddities of the impact and sustainable investment themes is how little of the capital being allocated to these strategies has focused on the world’s oceans.
Research from the World Economic Forum says $175 billion is needed per annum to achieve SDG14 (life below water) by 2030 but between 2015 and 2019, just below $10 billion in total was invested.
In the natural assets world, forestry’s proven carbon sequestration and biodiversity enhancement credentials have certainly been a boon for investments, while farmland has also benefited for similar reasons, albeit to a lesser extent.
Both asset types are credited with absorbing CO2, producing oxygen and capturing excess heat (when appropriately maintained and harvested) but neither can hold a candle to the blue economy in terms of their contributions in these areas.
“The ocean generates 50 percent of the oxygen we need, absorbs 25 percent of all carbon dioxide emissions and captures 90 percent of the excess heat generated by these emissions. It is not just ‘the lungs of the planet’ but also its largest carbon sink,” says the UN.
What’s more, ocean habitats such as seagrasses and mangroves can sequester CO2 up to four times faster than trees, support healthy fisheries, improve water quality and provide coastal protection from floods and storms. Coral reefs, meanwhile, cover less than 0.1 percent of the world’s oceans but support more than 25 percent of marine biodiversity.
With regard to private markets’ contribution to SDG14, investment funds exclusively dedicated to ocean conservation and rehabilitation have been few and far between.
More recently, SWEN Capital Partners’ Blue Ocean Fund exceeded its $120 million target to close on $170 million, suggesting a growing willingness among LPs to back such vehicles. That suggestion was gently reinforced by Ocean 14 Capital surpassing its €150 million target this month (August) with hopes of a €200 million close by the end of this year.
When the investment focus is widened a little further to look at sustainable aquaculture-dedicated PE investments – an important part of relieving the pressure on wild fisheries – there are further green shoots to be found.
8F Asset Management, meanwhile, a PE firm that focuses exclusively on portfolio company Pure Salmon, a land-based aquaculture business, closed its oversubscribed Fund I on $358 million in 2020 and held a $61 million first close on its Southeast Asia Fund in 2021.
Government– and DFI-initiated capital pools dedicated to ocean health have also started to take shape with more regularity, as blue bonds from the likes of Bank of China and Nordic Investment Bank have also tried to service the capital need.
Woven into this landscape are the contributions made by debt-for-nature swaps, all of which have so far focused heavily on marine conservation and restoration, opening another gateway through which capital can be fueled to the world’s oceans.
Despite the growing frequency of good news for the blue economy, however, the sheer scale of investment required means the gulf between capital committed and capital needed remains daunting.
A similar rush of investments from new and returning investors, similar to those experienced by timberland, would be a welcome boost.