In our note “The Forgotten Ocean” published on 18th October 2022, we described how the marine ecosystem is essential to humankind in numerous ways while it is off the radar screen for most investors.

The Ocean covers 70% of the earth’s surface and holds 97% of all water and 80% of all forms of life on the planet. About 40% of the world's population lives within 100 kilometres of the coast. It is the 7th largest economy in the world and it is expected to double by 2030 according to OECD (2016).

The ocean produces at least 50% of the oxygen worldwide through the process of photosynthesis. It also absorbs a quarter of our global CO2 emissions each year, acting as the main regulator of our planet's climate.

However, the health of the global ocean is under increasing stress, faced with the triple crises of climate change, nature loss, and pollution as a result of increasing human activity. As population density and economic activity in the coastal zone increase, pressures on coastal ecosystems increase. They all contribute to the loss of biodiversity and ecosystem services.

The ocean plays a crucial role in the global carbon cycle by absorbing large amounts of carbon dioxide from the atmosphere. While this helps regulate the Earth's climate, it also leads to ocean acidification, which is a significant problem.

The paradox is that the Ocean Ecosystem remains off the radar screen for most investors despite its potential economic and environmental attractiveness.

While there is a growing interest in UN SDGs as channels to invest in sustainable themes, investors have a narrow stance: According to Trackinsight, 3 SDGs account for 77% of ETFs funds by number (Climate Action, Affordable and Clean Energy and Industry, Innovation and Infrastructure). There are only two ETFs that track UN SDG 14 Life below Water out of 361 SDG theme ETFs.

All is not blue… Three key challenges when considering the Ocean as an investment opportunity

 Lack of investment-grade projects and listed companies to invest in. Our initial analysis has shown that over 600 listed worldwide stocks are exposed to some degree to the Blue Economy, half of which are part of large benchmark indices. Private capital may be at present the preferred channel to finance smaller locally-based projects.

There is no global organisation: 65% of the ocean is considered international waters and this leads to a problem of responsibility and collaboration. While the High Seas Treaty was reached in March 2023 by UN members for the protection of 30% of the high seas by 2030, many questions remain to be answered around the implementation of these measures.

Industry interconnectivity, lack of frameworks and standards focused on ocean sustainability.

We map existing solutions that aim to limit negative externalities in the ocean. We classify them under five themes (not exhaustive) that are important to the marine ecosystem. We then list solutions accordingly but we don’t provide in-depth explanations as we plan to publish research on them.

This analysis is intended to help the investors direct their research for stock selection for their portfolio construction. Given the growing interest in the Blue Economy, new solutions may come to the market and we will be looking at updating these lists in the future.

1. Solutions around the Blue Economy, including established and emerging sectors.

2. Solutions that are related to the targets of SDG 14, Life Below Water.

3. Supply chains that are linked to the ocean ecosystem.

4. Solutions that offer prevention, restoration and conservation of the ocean ecosystem.

5. Circular economy solutions.

Going forward, it is our intention to explore each solution. We will start with biodiversity in the ocean space. We feel it should be an insightful subject for the investors, given their low traction on the Blue Economy and the rise in interest in biodiversity-related subjects from government, regulators and corporates.