With an annual economic value estimated at USD$2.5 trillion, ocean-linked sectors (the ones that depend upon and impact ocean health) are equivalent to the world’s 7th largest economy. Despite being one of the planet’s greatest assets, oceans are at risk. What is the role of ocean finance in ensuring sustainable oceans for future generations?
Oceans play a critical role in regulating global climate, supplying oxygen to the atmosphere, hosting various species of marine life and providing food for millions of people. Absorbing CO2 from the atmosphere, the oceans are also vital for reducing global warming, while they are vital for the very existence of shipping.
At the same time, oceans are in crisis, with sea level rise, pollution, overfishing, rising levels of acidification and biodiversity loss being only a few of the risks to jeopardize their health. And despite this, investment in “blue economy” initiatives is still at a low level. The UN SDG 14 (Life Below Water) has attracted less than 1% of climate finance, the least of all the sustainable development goals, according to Reuters.
What is blue economy?
According to the official definition by the World Bank, the blue economy is an economic sector based on the sustainable use of ocean resources for economic growth, improved livelihoods, and ocean ecosystem health.
The blue economy focuses on the utilization of the ocean’s resources in a responsible and sustainable manner, while recognizing the economic, social, and environmental importance of the marine environment.
The term includes all the economic activities related to oceans, seas and coasts, such as fishing, aquaculture, maritime transport and logistics, coastal tourism, and renewable energy, as well as maritime law and policy, finance and investment, and marine technology.
Blue economy initiatives: Where we stand
-Sea Change Impact Financing Facility (SCIFF)
Launched by the Ocean Risk and Resilience Action Alliance (ORRAA), the Sea Change Impact Financing Facility is a multi-stakeholder alliance on ocean finance that brings insurers, banks, governments, academia and civil society together, in a bid to drive at least USD$1 billion of private investment into coastal and ocean ecosystems by 2030. The primary goal of SCIFF is to ensure that coastal communities can adapt to climate change and benefit from a sustainable ocean economy.
-The blue carbon principles
Blue carbon – the carbon captured and sequestered by marine ecosystems – is experiencing rising demand. Launched on the sidelines of COP27, the “High-Quality Blue Carbon Principles and Guidance” is a first-of-a-kind blue carbon framework to guide the development and purchasing of high-quality blue carbon projects and credits. The five principles are:
- Safeguard nature
- Empower people
- Employ the best information and carbon accounting principles
- Operate contextually and locally
- Mobilize high integrity capital
-The Green Shipping Corridors
Established by the United Nations Environment Programme (UNEP) in 2018, the Green Shipping Corridors are specific trade routes between major port hubs that have been established to reduce environmental impacts from shipping activities. These corridors often include measures such as speed reduction, efficient navigation, fuel-saving technologies, route optimization and improved waste management.
A more recent initiative during COP 26 in late 2021 committed to establish at least six corridors by 2025 and a progress report released on the occasion of COP 27 last November showed more than 20 initiatives underway. Also at COP 27, the Zero-Emission Shipping Mission launched the Green Shipping Corridor Hub – an interactive platform and toolkit to support the development of green shipping corridors.
Eight of the biggest container shipping companies, accounting for 85% of container shipping volume are engaged in green shipping corridors, Jesse Fahnestock, project director, decarbonization, at the Global Maritime Forum, told Reuters.
-The Sustainable Blue Economy Finance Initiative
Meanwhile, new research and platforms on sustainable oceans finance are being developed. The UNEP Finance Initiative has launched the Sustainable Blue Economy Finance Initiative, an UN-convened global community focused on the intersection between private finance and ocean health, supporting the implementation of the Sustainable Blue Economy Finance Principles. UNEP works across the financial community to provide guidance and frameworks to ensure that investment, underwriting and lending activities are aligned to the UN SDG 14.
Blue economy: The way forward for shipping
In the EU alone, shipping carries 77% of external trade and 35% of intra-EU trade. Therefore, it is an important pillar of the Blue Economy, although it does exert pressure on the environment (shipping accounts for emissions of 1 billion tonnes of CO2 or 3% of global GHG emissions every year).
A recent report by the EU showed that an absence of climate action could cause rising sea levels that would lead to a direct loss of more than €200 billion per year by 2080 in the EU, mostly due to damage to buildings in coastal areas. A transition to a sustainable economy is no longer a matter of if, but a matter of when.
With sustainability loans and bonds becoming more and more a reality (see the European Investment Bank which provides loans to companies looking to invest in green shipping projects) and the Green Shipping Corridors initiative being a great example of a unified approach towards the challenge of decarbonization, the industry’s efforts towards a greener future seem commendable.
