Blue Finance, sustainable ocean economy

Blue finance's goal is to create a new financing constituency for the sustainable ocean economy, to study the risks and barriers to more sustainable investment in the ocean, to find out how innovative financing is changing the investment landscape, as well as the opportunities of investing in the ocean. According to Eric Usher, Head of UNEP FI, a transformation in private finance to regenerate ocean health is needed, because ocean health is a critical success factor in the world economy. Until 2020, the value of the blue economy was estimated at US$2.5trn annually. The financial system is now aware of the opportunities to back a healthy ocean. To rebuild the world’s largest ecosystem, increased awareness and industry guidance will be crucial for the financial community. There is a direct impact of the financial system on the ocean. As financiers of marine industries, banks’, insurers’ and investors’ balance sheets depend on the health and abundance of marine resources. Even financial institutions located far from the coastline may have important links to the ocean through its clients. Varied industries rely on marine biotechnology as a source for R&D. Other land-based industries with close ties to the ocean include agriculture, and the production and use of plastics - 8m metric tonnes of which end up in the ocean each year. Pollution, biodiversity breakdown and climate change show the urgency and bring the focus to the seas. Highly destructive industries call into question humanity’s impact on the ocean and its health is becoming the international priority. Next year’s UN Ocean Conference and the Convention on Biological Diversity’s Post-2020 Global Biodiversity Framework will influence future policies and strategies around UN Sustainable Development Goal 14 on “life below water”. Also, the ocean is an integral part of meeting the Paris Agreement, given that ocean-based climate action could deliver up to 21% of the annual greenhouse gas emission cuts needed by 2050. Governments and policymakers cannot handle this problem alone. The financial community has a significant role to play, with the ocean economy projected to double in size by 2030 and increasing opportunities for building a sustainable ocean economy. The sustainable “blue finance” gains importance among banks, insurers and investors. Some are already launching new financial solutions built on the green finance experience and including landmark commercial blue bonds and new public-private partnerships like the Global Fund for Coral Reefs (that plan to raise and invest US$500m in coral-reef conservation over the next 10 years). To complement existing portfolios, institutions started exploiting the power of natural capital, through nature-friendly solutions like ocean-based funds or blue carbon credits. But they will not create the needed impact alone. The recent survey of financial institutions showed that out of 92% of respondents familiar with the concept of a sustainable blue economy, 59% of these had not applied it. Actually, its scale requires the entire financial system to work together to rebuild ocean prosperity, restore biodiversity and regenerate ocean health. There are 3 enabling pathways to allow private finance to progress in transforming the ocean landscape: 1. An urgent need for increased ocean awareness amongst finance professionals To this end, Friends of Ocean Action and the High Level Panel for a Sustainable Ocean Economy released in 2020 Ocean Finance Handbook and Blue Paper on Ocean Finance, containing key insights into emerging opportunities and guiding private finance towards ocean resilience and recovery. 2. Financial institutions must assess their current investment, lending and underwriting activities for impacts or dependencies on the ocean From 2021, the UN Decade of Ocean Science for Sustainable Development will bring improvements in marine science and data collection, so that financial institutions can identify, quantify and manage their ocean-related financial risks and opportunities. 3. A wider adoption and implementation of industry-wide standards and guidelines, including the Sustainable Blue Economy Finance Principles These science-based principles allow since 2018 financiers to have an ocean-systems approach to the corporate strategies of their clients, to seek positive impacts in their transactions and increase financial flows towards ocean-positive businesses and solutions. Further guidance will soon bring advice for financial institutions on choosing the blue economy activities, challenging clients on questions of sustainability and avoiding harmful areas. The world seeks to build back better from the Covid-19, and private finance holds the keys to the changes required to put the blue economy on a path to sustainable economic growth. Increased ocean literacy, review of current activities, and industry guidelines implementation are first steps for the finance sector to lead the way in building back bluer. Europe is already a leader in tidal, wave and offshore wind energy and green hydrogen offers high potential to accelerate the ocean energy opportunity.The energy is a balancing act between its benefits and costs. Therefore, we seek new energy sources. Today wave, tidal and wind energy are in the heart of the green energy mix. However, these sources are often restrained by periods of oversupply or undersupply. The experts have praised the ocean power's potential for years. Given that half of wave and tidal patents worldwide are held by European companies, the EU is currently the leader in ocean energy. It aims to deploy 100 GW of wave and tidal energy capacity by 2050 (10% of Europe’s current electricity consumption). Nonetheless, tidal is very expensive. Compared with offshore wind, it currently costs 2-3 times more. However, in-stream tidal and wave renewables might gain importance soon with technological advances and the potential to run alongside offshore wind and hydrogen. The European Commission, in its new hydrogen strategy, made hydrogen a key element to build an integrated and decarbonised energy system. The industry leaders world-wide are looking to hydrogen as a way to reach their sustainability objectives. "We need to replace fossil fuel and also increase clean electricity production to meet a growing demand. This will require intermediate and parallel steps with other technical solutions to decarbonise existing processes: for hydrogen this means carbon capture and storage to be used in tandem with grey hydrogen to reduce CO2 emissions." explained Chief executive of Siemens Energy BV, Adam Middleton. As industries shifted from unclean grey hydrogen towards cleaner, but more costly, green hydrogen, more investments are required to overcome technological barriers and make green hydrogen competitive. Kadri Simson, EU’s energy chief, believes green hydrogen has the “potential to be a game changer”. It produces zero emissions, can be stored and could be used to produce renewable methanol and renewable jet-fuel. In order to meet EU’s 2030 goals, current technologies must improve and new ones appear, which is a challenging process. Many experts think that hydrogen technologies will be developed only in ten years. We must hurry to develop, to test, to deploy. Tidal power and hydrogen bring outstanding opportunities for offshore wind expansion, given that offshore energy technologies can be integrated. If there is excess electricity production from wind farms, rather than cutting back on production, the excess energy can be used to produce hydrogen through electrolysis and store it for future use. The International Energy Agency (IEA) claims that the current offshore wind market doesn't harness its full potential, as it might generate more than 420,000 terawatt hours per year worldwide, which is more than 18 times the global electricity demand nowadays. According to the IEA, thanks to policy support the EU reached almost 20 GW of offshore wind capacity by the end of 2018 and became a global leader. Furthermore, latest policies aim to quadruple offshore wind capacity by 2030. Such quick growth is the result of ongoing technological innovation. As the costs for offshore wind energy continue to decrease, offshore electricity is becoming competitive with other renewables. The balance between productivity and profitability has never been so aligned. Wind energy has the capacity to become colossal, whether as a stand-alone or combined with ocean power and hydrogen technologies. IEA data show that the EU is a current leader, but others are catching up, especially China, which added more offshore wind capacity in 2018 than any other country.