Blue financing

Blue financing

Summary

 

Can sustainable and blue financing help save our waters?

 

  • The global ocean economy is estimated to be USD 1.5 trillion

  • The oceans are in trouble due to acidification and warming waters

  • If no action is taken 80% of our oceans will be disrupted by 2050

  • The blue economy seeks to provide a continuation of the economic value provided to us by the ocean

  • Blue financing (e.g. blue bonds) are intended to fund projects and activities beneficial to our oceans

  • Iceland is in a key position to be a leader in the blue financing space given its long history and relationship with the ocean

The state of our waters

 

For millennia the oceans have provided humanity with a source of food and wonder. Humankind has sailed its seas and benefited from it to the point where the global ocean economy now estimated to be USD 1.5 trillion, which if it was a country, would be the 7th largest in terms of GDP.

 

This is no secret to Icelanders who have lived off of the oceans for centuries. Before heavy industry, the rise and fall of banking, and the tourism boom - there was fishing. This remains true today, where the fishing industry remains a cornerstone of the Icelandic economy, employing over 9,000 people and contributing directly and indirectly to approximately 25% of the country’s GDP and 38% of the country’s exports.

It is also no secret that the world’s oceans are in trouble. Overfishing has led UNESCO to estimate that 13% of the global fish stock have ‘collapsed’. Combined with the World Bank’s estimate that over 90% of all fisheries are considered to be overexploited or overfished, there are serious reasons to be concerned about the future of life in our oceans.

 

If significant action is not taken by the year 2050, it is expected that 80% of all oceans will be disrupted by climate change. This damage to our oceans and its biological life has a dual impact: 

 

Acidification. The ocean is referred to as a carbon sink, meaning that it acts as a natural reservoir to absorb and store the carbon dioxide (CO2) that we emit, causing ocean acidification. It is estimated that the oceans have historically absorbed 25% of all human-caused CO2 emissions. This acidification is what has led to mass coral reef bleaching, and threatens both plankton and ocean shell creatures, causing an existential threat to the ocean’s food chain.

 

Warming waters. It is not just CO2 that the oceans have been absorbing. Global research has additionally shown that the oceans are absorbing over 90% of the excess heat caused by global warming. These warming waters are in turn changing the movement of fish stocks, as fish stocks are moving towards the poles in pursuit of cooler waters.

Iceland has already begun to see the impacts of this, where Capelin, a type of smelt, have begun to migrate further north. This has led to near non-existent catch over the past two years, which has had a measurable impact on Iceland’s economy according to the Central Bank of Iceland. This has shown itself politically as well, as the warmer watered mackerel have begun to move into Icelandic waters, causing new political disputes in 2016 with usually amiable neighbours of Norway and the Faroe Islands over the right to catch these migrating fish. 

 

Additionally, as the ocean’s fish stocks rapidly decline, the ocean’s plastic stock is flourishing. Ocean plastic waste has exploded in the last 30 years, and according to the Ellen McArthur Foundation, by 2025 there will be one metric tonne of plastic for every three metric tonnes of fish in the oceans, and by 2050 we can expect these numbers to be equal. This will threaten the Icelandic fishing industry where plastic will increasingly find its way into the ocean’s food chain.

 

The blue economy

 

The world must change its course and steer towards a sustainable “Blue Economy” in which resources the oceans provide are utilized sustainably and with the goal of preserving the ocean’s ecosystems.

 

The blue economy seeks to provide a continuation of the economic value provided to us by the ocean through the ecological protection of the ecosystems that provide this value. By maintaining and recovering fish stocks, having governance in place that understands and protects important ecosystems, and respecting the integrity of these ecosystems, the blue economy can continue to provide the employment, income, and food security that it has supplied for millennia. 

 

The World Wildlife Fund announced the principles of a sustainable blue economy, in which the social-economic benefits that the oceans provide can be sustained, those marine ecosystems are restored, protected, and maintained, and that this blue economy becomes more efficient and circular. See, for example, the increased utilization of the Icelandic Cod in the picture below.

 

The utilization of the Icelandic Cod from the

The Iceland Ocean Cluster 

 

Blue bonds & blue financing

 

Blue bonds are a new member of the labelled bond family, which hereto have included green bonds, social bonds, and sustainable bonds. Each intended to fund environmentally beneficial projects, social impact projects, and a combination of the two. Blue bonds and other blue financing, however, are intended to fund projects and activities which are beneficial to our oceans.

 

The Republic of Seychelles launched the first “Blue Bond” in 2018. Assisted by the World Bank, Seychelles raised USD 15 m from international investors to support the expansion of protected marine areas and to develop their blue economy.

 

Jenn Pryce, CEO of Calvert Impact Capital, one of the primary investors in this first blue bond issuance said, “The blue bond demonstrates the potential for capital markets to scale sustainable oceans solutions that expertly align marine conservation and economic opportunity. [...] The blue bond sets a great example of the type of bold leadership from governments and financing from public and private sectors that we need more of.”

 

Source: CIRCULAR Solutions for Niceland Seafood

 

Blue financing, including bonds, can help support a sustainable blue economy by funding activities that contribute to one of the core environmental objectives defined by the European Union: sustainable use and protection of water and marine resources. As long as those activities do not lead to a lock-in of assets that undermine long-term environmental goals, considering the economic life of those assets, along with having a substantial positive environmental impact on the basis of life-cycle considerations.

 

Iceland as a leader

 

Given Iceland’s long history of fishing, the country may be in a key position to influence the development of the blue financing space with implication on a global scale. Iceland can contribute from its long history and expertise to help develop guidelines, taxonomies, and itself become a leader in terms of blue financing of the fishing industry.

 

This is the perfect moment for Iceland to set sail for bluer waters, for a healthier, more sustainable ocean and economy.

 

Underlying data from the Climate Bond Initiative and other sources

 

How can CIRCULAR Solutions help?

 

CIRCULAR Solutions is a leading independent Nordic sustainability & ESG consulting and services firm. We provide a unique approach to sustainability based on robust, in-depth, and scientific best practices across sectors and industries and with municipalities and governments. We have strong knowledge of the fisheries and seafood sectors.

 

  • Strategies: we help build holistic and material sustainability/ESG strategies and policies using robust, in-depth, and scientific best practices.

  • Products & services: we help executives gain a better understanding of life-cycle impacts as well as structuring initiatives for a more responsible value-chain and product design.

  • Impact reporting: we help with engaging and authentic storytelling to help communicate sustainability initiatives to maximise internal and external stakeholder engagement.

  • Sustainable finance: we help identify sustainable investment opportunities which can be financed with e.g. blue and green financial instruments such as bonds, deposits, loans, etc.). We conduct ESG risk assessments, TCFD and ESG integrations and disclosures, and more.

 

CIRCULAR’s vision is to accelerate the transition to sustainability by enabling decision making with improved business intelligence, creating value for the economy and society.​ 

 

 

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June 10, 2020

April 3, 2020

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