Why Blue Economy Investments Are Not Getting Enough Love
The blue economy was first defined as an investment objective by the United Nations in 2012 and the oceans are also included as part of the UN’s Agenda for Sustainable Development laid out in 2015. It is one of the UN’s 17 Sustainable Development Goals.
There are a number of key sectors now covered under this fairly diverse umbrella, among them aquaculture, renewable energy, ocean conservation, coastal and maritime tourism, and fisheries.
The importance of this area of our environment is not to be underestimated by investors: the ocean contributes EUR 1.27 billion in gross added value to the global economy annually, and is expected to account for EUR 2.3 trillion by 2030. Just within the EU, the blue economy accounted for 4.5m jobs in 2019.
“With a framework for ocean conservation now in place, there is a strong case for investors to assess opportunities in the blue economy,” said Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer, in a who is also CEO of the Institute of Sustainable Investing, in a recent article posted on Morgan Stanley's website. “Over $3 trillion of funding is needed in the coming decades to protect our oceans so that they can continue to play a critical role in tackling climate change, curbing biodiversity loss and supporting inclusive economic growth.”
Investors will need to play a more active role in supporting an eco-system which is vital for our survival on this planet. Oceans currently face numerous challenges, including pollution and the destruction of natural habitats. Yet as the global population increases, yet more demands are being placed on oceans, including the need to feed more people.
The High Level Panel for a Sustainable Ocean Economy, part of the World Resource Institute, believes investing in a sustainable ocean economy could bring net positive returns. Just a handful of the possible investment areas – offshore wind, sustainable ocean-based food production, decarbonisation of international shipping and the conservation and restoration of mangrove swamps – could yield a benefit-cost ratio of between £3:1 (mangroves) and 12:1 (offshore wind) over a three decade period.
According to a report issued by the European Union, 87% of institutional investors are now interested in blue economy projects. But while many investors now have allocations to specific green economy projects and companies, to achieve the SDG 14 Sustainable Development Goal, more specific blue economy investment is required.
Algarve Partners, a Portuguese family office, is already backing sustainable Atlantic fishing, aquaculture, and seafood production projects as a major part of its ongoing strategy. “There’s a shortage of sustainable blue economy ventures out there,” says Nuno Battaglia, Chairman of Algarve Partners. “We are all stewards of the planet. And as capital allocators, including family offices and fund managers, we have a moral duty to direct capital responsibly. This responsibility cannot be outsourced to governments and NGOs. If we are to preserve our oceans and ensure food security, we must invest in responsible and profitable fishing, aquaculture and seafood production. We can’t eat fintech.”
Algarve Partners is already backing two projects in Portugal to support the growth of sustainable fishing and aquaculture, and plans to make blue economy investments a big part of its strategy going forwards.
In the last five years the number of specifically blue economy deals have picked up, with a 200% increase in the number of financial transactions. Seed rounds represented 20% of the deal flow followed by acquisitions. But there remains a significant funding gap if SDG targets around global oceans are to be achieved. In the EU alone, the financing gap for SMEs in the blue economy ranges between EUR 60 and 70m.
Venture capital and private equity funds between them covered a third of the mapped blue economy deals between January 2000 and February 2023, according to EU data. Banks made up another 4% while incubators and accelerators added another 11%.
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