OpinionDec 21 2021

The market for open ocean investment is nascent, but the outlook for investors is promising

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The market for open ocean investment is nascent, but the outlook for investors is promising

The ocean is a fundamental environmental and economic engine. It provides a life-giving ecosystem necessary to sustain 3bn people around the world. 

Best of all, it does these things for free. 

For centuries, global economies have relied on the ocean to expand and thrive. Despite this reliance, the true value the ocean provides has yet to be fully appreciated. Recent studies have valued the asset base of ocean at around $25tn (£18.9tn), substantially more than what is invested in its protection.  

Nature-based investment in marine ecosystems comprises just 1 per cent of the total global climate finance budget, with one of the UN’s Sustainable Development Goals – Life Below Water – remaining among the least funded. 

Where is capital being mobilised? 

A considerable amount of funding in nature-based solutions comes from the public sector, contributing around $115bn a year. Private sector funding amounts to only $18bn a year and is largely invested in sustainable supply chains and environmental offsets. 

Of the little investment being allocated to protect oceans, the majority is assigned to coastal ecosystems like saltmarshes, seagrasses, and mangroves, which make up the current definition of ‘blue carbon’. Open and deep ocean ecosystems remain relatively untouched by comparison.

The gap is largely because coastal and near-shore ecosystems are generally well understood and easy to research, making assigning an accurate value to their carbon absorption potential more straightforward.

While the potential certainly exists, creating investable products in deep and open ocean ecosystems remains a challenge. On the coast, however, the blue carbon market has continued to develop at pace, with non-governmental organisations, corporates and policymakers coming together to create and launch products on a national scale. 

The rise of Blue Bonds and blended finance 

In 2018 the World Bank issued the first world’s first sovereign ‘blue bond’ in the Seychelles. It raised $15m from international investors who will receive a 6.5 per cent annual interest rate. The bond is lauded as a perfect example of how governments, development banks and private corporations can come together to harness the power of capital markets to finance sustainable marine projects, while deriving value for investors. 

While blue bonds are paving the way to fresh investment in blue carbon, we cannot look to them alone to solve the ongoing crisis within the ocean. Like most blue carbon projects before them, blue bonds again target investment on coastal or near-shore environments, leaving the majority of marine ecosystems excluded. The key to closing this gap lies in research.