Euromoney, Helen Avery, 7 March 2018: https://goo.gl/Zdhv9L
Blue finance is set to take off this year, buoyed by growing appetite for investments in sustainable fisheries, conservation and alternative plastics. It’s further evidence of the influence of the UN Sustainable Development Goals.
Blue finance is coming. That’s right.
Green finance is well and truly here, but this year the subset that is blue finance will take root and hopefully bring with it investment products and solutions for UN Sustainable Development Goal (SDG) 14 ‘Life below water’, which seeks ‘to conserve and sustainably use the oceans, seas and marine resources.’
In February, the Seychelles made headlines as it finalised the creation of two new marine parks in return for writing off a large part of its national debt. Much of the islands’ biodiversity is at risk because of mass coral bleaching from warming waters, as well as overfishing.
All extractive industries, from fishing to oil exploitation, are banned in the park that surrounds the island of Aldabra and is roughly the size of Scotland. A second area around the island of Mahé has restrictions, but allows some controlled activities.
The Nature Conservancy helped the Seychelles to structure the debt-swap for marine protection deal, in which $22 million owed to the UK, France, Belgium and Italy was bought at a discount.
The deal highlights what financial expertise can do when it is married to the public sector and philanthropy. More marine-related deals are expected to emerge this year – hopefully benefiting from the increased awareness brought about by 2018 being the International Year of the Reef.
Blue finance is particularly focused on financing marine-related protection, as well as tackling overfishing and pollution. That gives a lot of scope for investment products. Earlier this year, for example, the European Investment Bank announced it would be investing about €17 million in the Althelia Sustainable Ocean Fund.
Althelia has been raising money for the fund for the last two years, hoping to prove that small-scale fisheries can be both sustainable and profitable. Studies certainly support the hypothesis; they have shown that profits in the sector could rise by 115% to $51 billion a year if fisheries were managed in such a way. Althelia hopes to raise a total of €85 million to invest in 15 to 20 ocean projects in Latin America, Africa and Asia.
Credit Suisse is also expected to offer several ocean-related investments this year, as well as hosting an event in Lisbon in May. Meanwhile, the World Ocean Summit is gathering in Cancun in early March to bring governments, NGOs, researchers and financiers together to brainstorm this particular UN SDG – further evidence of their power.
I’m borderline obsessed about them. Quite why the SDGs have captured the imagination of corporates (both financial and non-financial) in a way that the Millennium Development Goals did not, we can only guess. Perhaps there is now the right level of mainstream interest in solving the world’s multiple challenges by using finance; perhaps it is the comfort of studies that have shown that sustainable finance produces competitive returns; or perhaps it is as simple as the fact that the 17 coloured boxes and icons that represent the different UN SDGs are more appealing than the former’s eight.
In any event, bankers in sustainable finance (or even those aspiring to move the needle towards sustainable finance in their banks) report that the SDGs have been a game changer. It is not that large sums have moved towards these goals yet, but they say it has given them a marketing tool to begin conversations with clients and their own senior management – they can clearly say: “This is what we are all aiming for, now let’s make sure we’re part of it.”
It also gives banks the opportunity to highlight the work they have been carrying out for some time now and revisit older conversations that they have already had with those clients and management.
It is clear that there is something of an uphill battle for those inside banks to get their leadership fully on board when it comes to contemporary themes like sustainability and diversity, so every little helps.
Indeed, not only do the 17 goals help make the world’s challenges feel more surmountable by clearly laying out what we collectively need to do, I can also begin to see a pattern emerging of which SDGs certain individual banks are focusing on – intentionally or not.
The work that Goldman Sachs has done in Newark and in Baltimore might be considered as responding to SDG8 and SDG10: decent work and economic growth, and sustainable cities and communities. JPMorgan’s work in Detroit could also be in this area, perhaps adding SDG9 (industry, innovation and infrastructure).
UBS’s work in health investments would be SDG3. Citi’s efforts in financial inclusion could be SDG10: reduced inequalities. Bank of America Merrill Lynch’s green bond push could be SDG7: affordable and clean energy. And, of course, Credit Suisse’s education notes would be SDG4 in addition to SDG14.
There is so much room within these 17 pockets for each bank to become a pioneer and be part of the larger move towards sustainable finance and corporate responsibility.
As blue finance emerges as a subcategory of green finance, it is exciting to think what other sub-categories we will see over the coming years.