The first mention of “Marine Economy” appeared in 1979 but “Blue Economy” became popular in 2010 following an article by Kildow and McIlgorm stating “The importance of estimating the contribution of the oceans to national economies”.
The authors added that the oceans were in trouble and experienced changes that could compromise life on both the sea and the land, affecting the economy and the environment.
Donna Le Tissier, based in JTC’s Guernsey office, gives her insights on sustainability and how to turn a Blue Economy idea into a successful fund reality.
A Drop in The Ocean
JTC supports a range of listed sustainable infrastructure funds as well as multiple private funds, including venture capital, targeting impact investing and climate change.
The Blue Economy is a concept that aims to promote sustainable development using ocean resources to benefit economies and livelihoods while preserving the health of marine and coastal ecosystems. The oceans are our planet’s life support, regulate the global climate system and in combination, represent the world’s largest ecosystem.
We know that oceans play an important role in regulating the Earth’s temperature, absorbing around 23 per cent of annual CO2 emissions generated by human activity, helping to mitigate the impacts of climate change.
The Blue Economy is a developing world initiative pioneered by Small Island Developing States (SIDS) but relevant to all, encompassing energy production, including offshore wind energy, shipping, fisheries, aquaculture, mining, coastal tourism, carbon storage, coastal protection, cultural values and biodiversity.
It was created as a long-term strategy to support sustainable economic growth through oceans-related sectors and activities while improving human well-being and social equity.
Sustainable Development Goal (SDG) 14 is dedicated to the conservation and sustainable use of the oceans, seas and marine resources. It sets out seven targets for a sustainable ocean economy by 2030. According to the OECD, the ocean economy is expected to double to $3 trillion by 2030.
Although much of the discussion and promotion of the Blue Economy is focused on oceans, financial institutions in landlocked countries also have an important role to play. Inland rivers and seas provide a link to the world’s oceans. Inland production of many goods and services are linked to value chains that include oceans. And, of course, drinking water facilities and irrigation are necessary in every part of the world.
Blue is the Colour
1) First things first
While “green finance” refers to climate-smart investing in virtually any industry or region, “blue finance” is dedicated specifically to ocean-friendly projects and water supply resources. Blue finance can include blue funds, blue bonds, blue loans, and other water-focused investments.
The International Finance Corporation (IFC) guidelines include eight categories of eligible projects, for example sustainable shipping and port logistics and offshore renewable energy production or sustainable tourism.
2) The basics
Classifying climate-smart marine-related finance as “blue” allows developers to target investors with a specific interest in water projects which could attract investors who are interested in issues such as sustainable ocean tourism, fishing, port development, or drinking water supplies.
3) Opportunities
Blue finance consists mostly of philanthropic and public funding. Private investment is largely limited to corporate social responsibility initiatives or impact investments that are not profit seeking. Nevertheless, this is an area of growing interest to the private sector. In late 2023, a survey of 700 senior executives and investors by Simmons & Simmons reported that 57% of executives consider investing in blue economy projects to be a top priority.
• Marketing blue economy elements of a fund may attract new investors.
• Adding a blue economy component to an existing portfolio may attract new investors or clients.
• Signals to investors that a fund is working to reduce the impacts of climate change and understands the future director of global financial flows
• An opportunity to become early players in a fast-growing segment of the new economy.
4) What is needed:
To rely on private funding alone would require marine projects that can deliver attractive returns on investment. According to the UK Blue Carbon Evidence Partnership, the requirements for growing markets and enabling investment in blue carbon projects are:
• Clear principles and standards for structuring investments.
• Clear governance to ensure new markets are transparent and deliver benefits to nature, the economy and local communities.
• Frameworks and principles at government level to guide the development of emerging nature markets.
A collaborative approach between public and private stakeholders will therefore be more effective than a siloed approach towards establishing a sustainable blue economy that can benefit both society and the ocean. There are also examples of Public Private Partnerships (PPP):
• A PPP agreement was signed in 2018 for the co-management of the second largest Protected Area of the Dominican Republic designed to address the triple bottom line – social, environmental and economic impact via the creation of new jobs in the Blue Economy sector for local populations, the conservation of critical ecosystems and financial returns.
5) Getting the right advice
Through JTC’s deep experience with fund services, we provide a range of solutions for private or public funds depending on the asset class and goals of the investment manager. In addition, our Sustainability Services team are able to provide training, compliance /health checks and advisory support for many of the ESG factors that companies need to demonstrate in order to substantiate their credentials to investors and the wider public, including reporting under regulatory frameworks and carbon offsets. As an example, we support Gresham House – British Sustainable Infrastructure Fund II LP (BSIF II) with the following services:
• Governance
• Company secretarial
• Fund administration
• Accounting
Whether managers are looking to launch a fund dedicated purely to the Blue Economy, add a blue finance element to their portfolio to create diversification, start an impact investing route with lesser risk, or send a clear message to current investors in order to attract new capital, it is clear that there are opportunities.
As islands, Jersey and Guernsey’s pasts are inextricably linked to the seas and oceans. Perhaps a fund to promote sustainable development using ocean resources to benefit economies and livelihoods while preserving the health of marine and coastal ecosystems will be part of their sustainable future.