UN Ocean Conference: The Role of the Financial Sector
Co-hosted by Kenya and Portugal, the United Nations Ocean Conference was held in Portugal between 27th June and 1st July. The event sought to advance the implementation of UN Sustainable Development Goal 14 (SDG 14). This aims to ‘conserve and sustainably use the oceans, seas and marine resources for sustainable development’. SDG 14 is currently the most underfunded of all goals. Therefore, the conference was used to accelerate cooperation and funding for developing countries and those who rely on the ocean directly for jobs and food. The conference hopes to drive a shift from proposals to actions which are driven by science.
Within the opening statement, the tone was set to stress how urgent the issue of conserving the ocean is. Current world conditions threaten the overall process of achieving all Sustainable Development Goals, including covid, conflicts, and the cost-of-living crisis. However, a powerful message of 'the right place, the right time, and the right approach' was made. This emphasised the mistake of using today's issues as an excuse to ignore the degradation of the oceans and the climate. The central message stressed that the overall issue of climate change can be controlled if we focus on preserving the ocean and marine life because they can provide climate solutions.
The poor management of the ocean has reduced its natural ability to restore itself. Due to human activity, it is flooded with 8 million tonnes of plastic each year, and this is set to increase by 40% by 2050. On top of this, illegal and unregulated fishing practices are threatening the fish population, with one-third of fish stocks being over-fished. By 2050 it is expected that our oceans may have more plastic than fish, by weight. These statistics show how detrimental human activity is to the ocean despite it being central to human existence. The ocean provides half of all oxygen we breathe, and three billion people depend on marine and coastal biodiversity for their livelihood.
Nature-related risks are becoming increasingly critical for businesses to factor into their business plans and strategic decisions. The implications of biodiversity loss on the economy are massive as the collapse of just six ecosystems by 2030 could lead to a 2% decrease in GDP worldwide. This increases to 10% of GDP in low-income countries. This will put 4 billion people at risk. It would be counterproductive economics for investors to not have biodiversity loss behind their analysis and key policies. The financial sector must recognise biodiversity loss as a source of risk and develop a response strategy and create an integrated approach to help engage with government, stakeholders and investors. Since fish stocks are declining, coral reefs are becoming more acidic, and water is becoming scarce and polluted, this pertains to the ocean and marine protection. Investment is needed to maintain these vital ecosystems as they will have direct effects on business growth.
The role of the financial sector is key to solving the ocean issue. In recent years there has been a push to invest in ESG companies, but the focus remains on lowering emissions and the decarbonisation of sectors. Although this is positive progress, there needs to be an additional push on financing the conservation of the oceans. This investment would lead to numerous commercial opportunities, such as the creation of jobs, the expansion of business capacity, and new investments. Ultimately, the three main areas that the financial sector could support are the decarbonisation of the shipping sector, investing in offshore renewable energy and ensuring a just transition.
The shipping sector is massive, with 90% of global trade transported via this. However, it is also a huge emitter and is currently not on a trajectory compatible with the Paris agreement. If the scale of the shipping sector is shown as if the sector was a country, then it would be the 8th largest emitter. Therefore, the decarbonisation of this industry is crucial. The private sector needs to mobilise investment as it is a major investment opportunity. The decarbonisation of the industry will require alternative fuels such as hydrogen and ammonia, and these investments would bring positive returns in the future. So, financial institutions must move away from short-term profit maximisation and look at long-term returns for their investments and the planet.
Investing in these actions requires commercialization of the opportunities to make the financial sector take notice. Making something investable is key. The ocean provides climate change solutions such as ocean renewable energy and off-shore wind is a key example of making this sector investable, with governments creating pledges to reach targets. The USA, for example, has pledged to scale-up its’ off-shore renewable energy up to 30 gigawatts of offshore wind energy by 2030. For other organisations and countries to follow this action, investment will be needed from both the private and public sectors, but it will create increasing returns
Finally, a just transition is essential to the overall development of the climate. If you can’t take the entire society with you, then the transition fails. Additionally, investments that only benefit the developed world will not be successful in tackling climate change. The financial sector must invest all over the world and create equal and distributed opportunities. This will create green jobs and investment will be needed to reskill and upskill workers to participate in the transition. Regardless of how advanced technology becomes, it must always be fair and just.
In summary, these opportunities will bring positive prospects to the private sector such as jobs, energy, investments, insurance etc. If we invest in preserving the ocean and protecting marine life, the ocean could provide 6 times more food and 40 times more renewable energy. This would help lift millions out of poverty. Global governments must get involved to support the transition and sustainable businesses. Furthermore, externalities must become internalised by placing a tax on high emitters and then feeding this tax back to innovative sectors which will be an incentive to move ahead in the transition. Ultimately, private sectors must not treat the biosphere as an externality, we are in it and financial and monetary stability relies on a functioning and secure biosphere.
Eve Paton
Chartered Banker Institute | Intern