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SPI Journal, Autumn 2022
It’s time to stop bankrolling deforestation

Protect the ocean, protect the economy

Dennis Fritsch, associate programme lead nature, United Nations Environment Programme Finance Initiative, explains how a new framework can support the finance industry in transitioning to a sustainable blue economy.

The global ocean, which produces over half of the oxygen we breathe, is the largest carbon sink on the planet and a haven for biodiversity. Its economic value is estimated at $24tn, with the annual value of produced goods and services across multiple sectors such as seafood, shipping and tourism estimated to be at least $2.5tn per year. This is equivalent to the world’s seventh largest economy in gross domestic product terms. Crucially, this blue economy relies on healthy ocean ecosystems for the abundance and resources that generate these incomes and holds the key to a sustainable future for both people and planet.

However, ocean health – and therefore its wealth – is under threat, faced with the triple crises of climate change, nature loss and pollution. Harmful approaches to ocean resources coupled with the damaging effects of climate change have put the long-term survival of the ocean at risk. Change is urgently needed – a business-as-usual approach to our ocean assets presents substantial risks. A WWF study revealed that a BAU scenario will leave the world’s economy – or rather, two-thirds of all listed companies – $8.4tn out of pocket over the next 15 years.

Public and private sector actors provide the financing, investment and insurance required to power ocean-linked sectors. They have significant leverage to steer humanity’s relationship from harmful extraction to sustainable and equitable use of marine resources. This transition is an opportunity for governments, financial institutions and other stakeholders to re-cast how we use, manage and protect ocean resources in line with the United Nations’ sustainable development goals 13 (climate action) and 14 (life below water).

We need significantly more sustainable ‘blue’ capital to move from destructive approaches to ocean assets to a climate-secure and sustainable blue economy. An SBE is an economy that provides social and economic benefits for current and future generations; restores, protects and maintains diverse, productive and resilient marine ecosystems; and is based on clean technologies, renewable energy and circular material flows.

Realising their ability to bring about a swift transformation, financial institutions are increasingly seeking ways to lower their risk exposure to unsustainable ocean practices while supporting businesses in transitioning towards an SBE. However, for most financial institutions, regardless of focus, size or breadth, the ocean and marine ecosystems are uncharted territory.

To help banks, insurers and investors get started, the UN Environment Programme Finance Initiative convenes a growing network of finance actors and ocean finance experts around the Sustainable Blue Economy Finance Principles – the  first global guiding framework supporting the alignment of financial activities with SDG14. These principles enable financial actors globally to drive the transition towards an SBE, leading to their endorsement by the government of Portugal and a push for collective endorsement by the G20.

Momentum has been increasing: as of September 2022, UNEP FI brings together a community of over 80 pioneering institutions with a total asset size of more than $11tn to build industry-wide guidance and tools to redirect the flow of capital towards ocean health. Market-first guidance – ‘Turning the Tide’ and ‘Diving Deep’ – has been developed in a multi-stakeholder effort to produce a practical, science-based toolkit supporting blue finance decision-making across major ocean sectors, from shipping and waste management to seafood.

One emerging innovative instrument to support the SBE are blue bonds. To provide market participants with clear criteria, practices and examples for blue bond issuances, UNEP FI is developing a global practitioner’s guide for bonds to finance the SBE together with the International Capital Market Association, International Finance Corporation, the Asian Development Bank and the UN Global Compact – publishing later this year.

Meanwhile, we are working with our network to implement the principles and to establish a crucial track record for blue finance projects and deals. We hope that our evolving portfolio of real-world examples and case studies can help show those financial actors who are at the start of their journey that sustainable blue finance can work in the real world.

Moving forward, we want to encourage collaboration between public and private actors, which must go hand-in-hand with including a strong ocean focus as part of international climate and biodiversity conferences. Ocean action is climate as well as nature action, and governments must take a leading role in closing the financing gap on SDG 14 to support national climate and biodiversity strategies. One way of doing so is by bolstering and de-risking an enabling environment that provides stability for capital to be mobilised towards a thriving SBE.

If widely endorsed by governments, the Sustainable Blue Finance Principles can provide a framework and vision to help transform how the ocean’s assets are used and managed to secure healthy ecosystems, assuring future environmental, social and economic resilience.

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