The blue economy is worth trillions of dollars and includes a rich palette of resources, providing many jobs, livelihoods and food security. It can be a source of great investment opportunities, but the question is how to invest in it in a way that ensures sustainable management, protection and preservation.
Responsible investing requires improving human wellbeing and social inequity, while containing environmental risks and threats to the ecology. At stake are tangible ‘blue resources’ such as fish stocks and deep sea oil, but also intangibles such as coastal ways of life and carbon sequestration.
The blue economy comprises these sectors:
- Fisheries
- Aquaculture
- Coastal and maritime tourism
- Marine biotechnology and bioprospecting
- Extractive industries
- Desalination
- Renewable marine energy
- Maritime transport, ports and related services, such as shipping and shipbuilding
- Waste disposal management
- Supporting activities, such as ocean monitoring and surveillance, ecosystem-based management, activities supporting carbon sequestration, and supportive financial mechanisms [1]
How to select companies for a blue economy portfolio?
One way is to target those companies that are leading the field of the sustainable use of ocean resources, that meet strict environmental, social and governance (ESG) criteria and whose practices are aligned with the principles of the UN Global Compact.
This is the approach of the ECPI Global ESG Blue Economy index. The ECPI Group research database covers more than 4 000 listed issuers of securities throughout the developed world. Using extra-financial ratings based on three ESG pillars, companies are assigned an ESG rating. They are scored on factors such as environmental strategy and policy, production process, community relations and governance.
At the next filtering stage, it is determined which blue economy categories they fall into: protection of the coastline and ecotourism; offshore wind power, marine biotechnology, tidal and wave power; wild fishing, fish farms, fish breeding and genetics; recycling, waste management and environmental services; and container shipping and ships’ equipment.
Exhibit 1: Blue economy index – industry sector breakdown
Source: ECPI Group; 29 January 2021
Alignment with the UN Global Compact principles means companies should, for example, support and respect human rights and the freedom of association, steer clear of forced labour and child labour, and promote greater environmental responsibility.
To ensure diversification across countries, there is a geographical limit. For example, the US cannot account for more than 50% of the index. The bar is set at 10% for all other countries.
To be eligible for inclusion, the companies selected must have a minimum market capitalisation of EUR 500 million and the average volume of securities traded over the preceding six months must total at least EUR 3 million.
An additional opportunity to invest sustainably
As a global sustainability theme, investing in the blue economy is fully aligned with BNP Paribas Asset Management’s sustainable investment priorities. These are focused on the energy transition, environmental protection and equality & inclusive growth.
We believe investing in the blue economy will help advance the fight against climate change and ensure that the oceans can continue to function as a sink for carbon emissions from human activity. Such investments are suited for investors with a long-term perspective, an interest in contributing to a greener future and making a positive impact.
In our view, finance can play a major role push companies linked to the blue economy to improve their practices. Those investors who consider the preservation of marine resources as an absolute priority are set to see investment opportunities in companies that develop marine and ocean projects opening up as awareness of the blue economy’s appeal grows.
Also read:
- The great blue economy wave
- How ocean states can benefit from a ‘blue recovery’ from COVID-19
- Water: a pervasive resource and a portfolio staple
Read more about sustainable investing
- Positioning for a green recovery from COVID-19
- Crisis and resilience – Navigating a sustainable recovery
[1] Source; The potential of the blue economy; World Bank Group, UN; 2017
