Oceans cover more than 70% of the surface of our planet, and their role in climate change is massive. As the largest of all the ecosystems, they generate half of the oxygen we need, absorb a quarter of all carbon dioxide emissions and capture 90% of the excess heat generated by these emissions.
Climate change has intensified in recent years, with many parts of the world experiencing extreme weather such as heatwaves and flooding. Improving ocean health is an important way to address the problem, given that these vast bodies of saltwater are the world’s largest carbon sinks that absorb more carbon than they emit.
Carbon sinks are becoming increasingly important in the fight against climate change, and ocean health plays a vital part. While forests are also crucial in regulating levels of carbon dioxide in our atmosphere, we must not underestimate the power of our oceans.
The awareness of the ocean’s capacity as our largest carbon sink has helped give rise to the concept of the blue economy. This term refers to all economic sectors directly or indirectly linked to the ocean.
In this article, we take a closer look at the blue economy and consider how and why it is essential for investors to funnel dollars towards it.
. . .
What is the blue economy?
The World Bank defines the blue economy as “the sustainable use of ocean resources for economic growth, improved livelihoods, and job creation while conserving the health of the ocean ecosystem.”
Billions of people worldwide rely on healthy oceans for jobs and food, underlining the critical need to sustainably use, manage and conserve this natural resource. According to the OECD, oceans contribute US$1.5 trillion in value-added to the global economy each year, which is expected to rise to US$3 trillion by 2030.
What makes up the blue economy?
The blue economy covers a wide range of interlinked established and emerging sectors, along with economic activities related to oceans, seas and coasts.
Renewable energy sources derived from the ocean are one of the most practical methods for producing clean energy. The fundamental renewable marine energies are wind, wave, tidal and ocean current.
Many countries, including Australia, China, Denmark, Italy, Korea, Portugal, Spain, the United Kingdom and the United States, are developing wave energy. Europe and China lead the development of offshore wind farms, with other countries, including the United States and South Korea having major facilities planned. Scientists are exploring ways to enable power plants to convert ocean current energy to electricity.
At the same time, oil companies in Europe are increasing their investments in renewable energy sources to become net-zero energy corporations by 2050 and reduce carbon emissions.
The Food and Agriculture Organization of the United Nations (FAO) estimated that around 58.5 million people were employed worldwide in the fisheries and aquaculture sector in 2020. Taking account of dependents, approximately 600 million people rely on this sector for their livelihoods. Investing in sustainable fisheries, particularly aquaculture, can generate well-paying jobs while promoting food security and economic equity, particularly in developing countries.
Improving fisheries management, investing in sustainable aquaculture, and protecting critical ecosystems may help restore ocean productivity and produce billions of dollars in benefits for developing countries.
Tourism is the largest sector of the ocean-based industries, representing 40% of its total export value. In addition to bringing jobs, investment and income, coastal and maritime tourism is a significant contributor to the economic prosperity of island and coastal communities.
Coastal nations can gain lasting economic recovery through sustainable and regenerative tourism, which also benefits the environment, the ocean, and the numerous people who depend on them.
Oceans play a vital role in climate change mitigation, absorbing roughly 23% of human-caused carbon dioxide emissions and more than 90% of the surplus heat produced by human-caused greenhouse gases.
Despite the potential of oceans to mitigate climate change, only eight of the 192 countries with nationally determined contributions (NDCs) under the Paris Agreement have included quantifiable measurements for marine carbon sequestration. Meanwhile, only two countries (the Bahamas and Fiji) have mentioned ocean-based renewable energy in their NDCs.
Climate change is a long-standing issue with no straightforward, quick fix. However, there are ways to mitigate some of its more detrimental consequences, and this is where investors like GGV can help by recognising the drivers of change.
Marine pollution threatens the oceans from multiple sources, primarily land-based but also from sea-based activities. Plastic pollution, in particular, harms economies, ecosystems, and food security.
According to projections, the overall cost to governments of managing plastic garbage between 2021 and 2040 will approach US$670 billion if suitable actions are not taken along the value chain.
Addressing plastic pollution necessitates a combination of complicated, multi-sectoral and country-specific solutions. It is necessary to eliminate leaks by enhancing solid waste management. A proper waste management policy would discourage indiscriminate plastic dumping and the disposal of dangerous chemical wastes from agriculture and manufacturing.
. . .
Who benefits from the blue economy?
The ocean is becoming increasingly important in meeting society’s growing demand for food, resources and energy. This need propels expansion in sectors of the blue economy such as marine aquaculture, offshore energy and commercial shipping.
In addition to regulating climate and weather and providing key ecosystem services, the ocean is vital to the global economy, accounting for more than 90% of trade via sea routes and providing employment opportunities for millions.
The European Union and the United Nations have also developed a long-term strategy to facilitate sustainable ocean-based economic benefits by implementing climate-resilient and inclusive blue economy policies that reduce human impact.
. . .
Leveraging impact investment to benefit the blue economy
As more organisations and governments recognise the link between financial markets and social change, there is a growing demand for approaches and investment vehicles that allow investors to address social, environmental or developmental challenges while earning returns that are at least proportional to traditional investment opportunities.
Impact investment vehicles can provide funding for developments that support sustainability broadly and climate targets more specifically. Leveraging impact investments for funding blue economic activity offers the best chance at ensuring that collaborative systemic models are utilised that benefit local communities while still ensuring ocean health.
. . .
Healthy oceans provide jobs and food, sustain economic growth, regulate the climate, and support the well-being of coastal communities. They are also essential contributors to global efforts to mitigate climate change.
The United Nations has recognized the growing relevance of the blue economy in its 17 Sustainable Development Goals (SDGs), which aim to improve the world. Goal 14 focuses on life beneath the water, intending to “conserve and sustainably utilise the ocean, oceans, and marine resources.” However, SDG 14 receives the least funding among the 17 SDGs.
Oceans and waterways are critical to the world economy and play an essential role in regulating the climate and weather. By helping to create green energy and fight climate change, the blue economy has immense potential to make a difference.