As the world grapples with the challenges of climate change, sustainable finance has largely focused on atmospheric climate mitigation. However, the ocean economy and the United Nations Sustainable Development Goal 14, "Life Below Water," have remained underinvested themes.
The lack of investable and scalable projects, regulatory uncertainties in the high seas, vague definitions, limited frameworks, and the predominant focus on atmospheric climate change mitigation have collectively left the ocean economy largely overlooked by investors. Nonetheless, Sustainable Fitch, a leader in sustainable finance analysis, believes that the growing regulatory attention to biodiversity, including ocean conservation and marine biodiversity loss, may soon prompt investors to reevaluate the environmental and social impacts of businesses across various sectors and regions, especially in light of mounting ocean-related biodiversity risks.
Amidst this backdrop, certain sectors within the ocean economy are gaining traction in the transition towards sustainability. Fishing, seafood, and shipping are among the most exposed sectors in this transformation. Corporations in these industries are now incorporating innovative nature-based solutions into their sustainability strategies. These solutions are driven by evolving technologies, changing regulations, and innovative financing instruments, all aimed at ensuring the sustainable use of ocean resources.
One flashpoint in this transition is deep-sea mining, a contentious issue that balances the exploitation of mineral reserves with the conservation of deep-sea ecosystems. This topic has garnered significant interest, but it has also sparked vociferous criticism from various stakeholders concerned about the ecological impacts.
The importance of the ocean cannot be overstated. It produces over half of the Earth's oxygen, absorbs 25% of carbon emissions, and regulates 93% of climate heat. However, the oceans are under siege from a multitude of human activities, including plastic waste, rising greenhouse gas emissions, overfishing, pollution, and wastewater discharge.
To address these threats, regulatory developments related to ocean protection are proliferating, bolstered by global legal frameworks around marine conservation. Jurisdictions worldwide are increasingly passing legislation that addresses specific marine protection issues, such as overfishing, marine pollution, and the destruction of natural habitats and wildlife.
A landmark event in ocean governance occurred in June 2023 when the United Nations finalized an agreement to ensure the conservation and sustainable use of marine biodiversity in areas beyond national jurisdictions. Known as the "High Seas" treaty, this agreement aims to establish a legal and governance framework for vast marine-protected areas, enhancing the regulation and oversight of resource exploitation in the deep sea. It plays a pivotal role in achieving the UN's ambitious 30x30 target, which calls for the protection of 30% of the world's oceans and land seas by 2023, as set forth at the 2022 UN Biodiversity Conference (COP 15).
The European Commission defines nature-based solutions as actions that restore, conserve, sustainably use, and manage natural or modified terrestrial, freshwater, coastal, and marine ecosystems to address societal and environmental challenges. In the context of the ocean economy, these solutions have the potential to tackle food and water security, climate mitigation and adaptation, as well as biodiversity loss. Examples include building coastal and marine infrastructure, the sustainable use and protection of natural marine ecosystems, and carbon sequestration through initiatives like seagrass restoration.
Deep-sea mining is emerging as a focal point of interest, driven by surging demand for metals critical to clean energy production, electric vehicle batteries, and technological advancements like wind turbines and solar panels. This process involves retrieving mineral deposits from the ocean floor at depths exceeding 200 meters. Although commercial-scale deep-sea mining has not yet commenced, governments' climate pledges and transition plans have ignited interest among mining companies and investors in exploring mineral deposits, including copper, nickel, aluminum, manganese, zinc, lithium, and cobalt, on the seabed.
However, the deep-sea mining sector faces significant challenges. There are currently no regulations or environmental standards in place for deep-sea mining, following the failure of member states of the UN-affiliated International Seabed Authority to reach a consensus on exploration and production on sea beds in July 2023. The finalization of regulations for commercial deep-sea mining is not expected before mid-2025 and remains subject to further negotiations.
In conclusion, the ocean economy is poised to become a focal point for sustainable finance, driven by regulatory changes, growing awareness of biodiversity risks, and the need to address pressing environmental issues. Harnessing nature-based solutions and navigating the complex terrain of deep-sea mining will be pivotal in unlocking investment opportunities while ensuring the long-term health of our oceans.
