If we were to consider the ocean as a country, it would rank amongst the world’s top economies. This is because the economic value of the ocean economy described as “gross marine product” is estimated at approximately $ 2.5 trillion per year, or about 3 percent of global GDP in 2022. Those figures alone would make the oceans the world’s seventh largest economy.
More than 3 billion people globally depend on coastal and marine ecosystems daily for their livelihoods and it is estimated that more than 350 million jobs are linked to the oceans worldwide. It is estimated that the total economic benefit from the oceans is at least $24 trillion.
Given the immediacy with which we are to address the pressing issues facing the planet and its people owing to climate change, the role of the oceans cannot be overstated. Oceans absorb 30 percent of global carbon dioxide emissions and act as an enormous heat sink for the planet, storing nearly 93 percent of all excess heat energy generated.
The oceans are, however, now facing a multitude of challenges. We are now seeing detrimental effects of climate change, biodiversity loss, overexploitation, and pollution of the oceans. It is therefore important that protecting the oceans benefits from the same levels of urgency and priority as we have for protecting the terrestrial parts of the planet.
It is also important to recognise the abundant opportunities which the oceans provide by way of solutions to the pressing issues of global hunger, productive employment, nature loss, climate change, and energy security.
The blue economy and the UN Sustainable Development Goals
The ocean economy refers to all sectors of the economy which have a direct or indirect connection to the ocean. The blue economy includes sectors such as fisheries and aquaculture; ocean-based renewable energy; sustainable management of living natural resources; coastal wastewater treatment and management; marine pollution prevention and control; sustainable coastal and marine ecotourism; research and development in blue technologies; and training in blue economy practices.
Importantly, a sustainable blue economy focuses on initiatives that would achieve some or all of the UN Sustainable Development Goals (SDGs). The SDGs are a set of 17 goals which were adopted unanimously in 2015 by all of the 193 UN member states. From a blue economy perspective, SDG 14 (Life below water), the “official” ocean SDG, calls on States to “conserve and sustainably use the oceans, seas and marine resources for sustainable development”.
Despite the value our oceans generate for our economies, SDG 14 is the least funded of all 17 SDGs. This is likely because finance does not flow freely through to ocean-based initiatives due to a lack of understanding of the importance of the ocean to our ecosystems, leading to further underinvestment.
With more than 3 billion people globally depending on coastal and marine ecosystems and with most of those people residing in developing countries, the impact from climate change to ocean-based sectors are greater as developing countries often disproportionately rely on traditional ocean-based sectors such as fisheries and tourism. Even several economic sectors in the UAE rely on maintaining its pristine marine environment including tourism and recreation, fisheries, coastal real estate, and ports and shipping.
The UAE, as a leading maritime nation, has recognised the importance of promoting the sustainable development of the oceans in key policy initiatives including the National Biodiversity Strategy and Action Plan, Vision 2021, and the Sustainable Finance Declarations in Abu Dhabi and Dubai.
Further, the UAE’s National 2030 Agenda for Sustainable Development presents a new cross-governmental framework linked to the UAE Vision 2021 and has categorised SDG 14 as a ‘competitive knowledge economy’, being a sector of the economy which focuses on promoting innovation and research and development and strengthening the regulatory framework.
Building momentum into investments in the blue economy
The financial sector has a key role to play in supporting ocean sustainability and delivering transformative change to ocean economies. There is high demand for financial instruments that pursue the objectives of the UN SDGs and promote ESG initiatives.
Therefore, innovative financial solutions are crucial to ensuring the protection and preservation of ocean and coastal resources, whilst also presenting opportunities for the economic, social, and environmental development of coastal States and sustainable businesses.
The Intergovernmental Panel on Climate Change in its sixth assessment report released in March 2023 stressed: Finance, technology, and international cooperation are critical enablers for accelerated climate action.
If climate goals are to be achieved, both adaptation and mitigation financing would need to increase many-fold. There is sufficient global capital to close the global investment gaps but there are barriers to redirect capital to climate action.
Blue finance can play a critical role in unlocking financing for ocean initiatives. Instruments such as blue bonds, a debt instrument issued to raise money specifically to finance the implementation of the SDGs related to the ocean, will be crucial to supporting sustainable oceans. Innovative ocean financing tools, like a blue bond, can be used to invest in sectors of the blue economy such as fisheries to enhance food security, protect livelihoods, and help drive sustainable ecosystems.
The blue bond market emerged in 2018, with the Seychelles, supported by the World Bank, issuing its $15m blue bond. As one of the world’s biodiversity hotspots, the Seychelles needed to balance its desire to pursue economic development against its need to protect its natural environment. Proceeds from the bond were used to support the expansion of marine protected areas, improve governance of priority fisheries, and the development of the Seychelles’ ocean economy.
Since then, markets have seen larger issuances by sovereigns, corporates and financial institutions. Similarly, debt for nature swaps, an exchange of debt forgiveness for conservation or sustainability commitments, is another type of financial tool with the potential to further support ocean initiatives, particularly in some Small Island Big Ocean States struggling with the serviceability of large sovereign debt. Considering the extent of the financing needed, a global effort from both the public and private sector is required.
Tapping global capital markets through blue finance also expands the available pool of investors and capital. Philanthropic and development capital will also play a key role in promoting and scaling-up ocean investment.
Not all States who are experience the most severe impacts of climate change are classified as Small Island Developing States or developing States. Many low to middle-income States are ineligible for concession financing to prioritise climate initiatives. Access to private sector capital can help these States to access funds to protect their ocean environments without compromising their economic development.
Funding blue initiatives also presents opportunities for ocean States to develop their own self-sustaining revenue streams whilst protecting their marine environment. For example, the implementation of marine protected areas can stimulate the regrowth of mangroves and seagrass meadows. Both mangroves and seagrass meadows provide carbon-capture services. Seagrass carbon-capture has been valued at approximately $2.3 trillion.
Access to carbon-capture services can allow these States to sell and trade carbon credits, creating an ongoing revenue stream which could be used to support other ocean initiatives. For example, the Abu Dhabi Global Environmental Data Initiative, in partnership with the Global Environment Facility, are undertaking research into blue carbon ecosystems in Abu Dhabi, in particular mangroves, seagrasses, salt marsh flats, sabkha, and intertidal algal flats.
The Abu Dhabi Blue Carbon Demonstration Project aims to improve local understanding of carbon storage and sequestration and the other ecosystem services that coastal blue carbon ecosystems provide in Abu Dhabi. The project provides an opportunity for the UAE to pursue natural carbon mitigation in a region which is dependent on fossil fuel extraction and be a market leader in blue ecosystems.
This initiative is further supported by the UAE’s National Carbon Sequestration Project which aims to plant 100 million mangroves by 2030 at the national level. The National Carbon Sequestration Project, announced in late 2022, shows a significant step up from the UAE’s previous target of planting 30 million mangroves by 2030, demonstrating the UAE’s strong leadership to pursue this strategic priority.
COP28
The UAE is hosting the 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP 28), in Dubai in November. His Excellency, Dr. Sultan Al Jaber, the president of COP28, has also announced an ambitious agenda, which by all accounts is aiming to surpass previous COP events. In his speech at the Global Energy Forum, Dr. Al Jaber made clear that the blue economy and climate financing would form a focal point at COP28.
Initiatives such as protecting and investing in nature-based solutions, such as mangroves, “which act as powerful carbon sinks while protecting coastlines and preserving natural ecosystems” will form part of the adaptation agenda. Meanwhile, climate financing will focus on reform of multilateral development banks and international financial institutions, with the goal of making climate finance more accessible and ensuring every concessional dollar is matched by $2 or $3 worth of private capital.
Further, Her Excellency Razan Al Mubarak and Dr. Mahmoud Mohieldin, the UN High-Level Climate Champions, are working with non-state actors to accelerate ocean-based climate solutions, such as green shipping, offshore wind, coastal ecosystems, aquatic food production and coastal tourism.
It is a huge step forward to see the blue economy and climate financing as a key part of the COP agenda for the second year running. Given the UAE’s ambition to elevate the global community’s collective response, it is hoped that the productive outcomes sought at COP28 will bring the necessary investment to the blue economy, and ultimately put the world on track for net zero by 2050 at the latest.
Whilst the full potential of blue financing is yet to be realised, there is increased optimism that the gap between the funds needed and available will continue to close. The health of the oceans and the health of our planet are intertwined. While it is important to protect ocean States’ marine real estate, it is also important to protect the lives and livelihoods of those who rely on the oceans.
Monetising ocean initiatives that are directed at both ocean preservation and economic development allows ocean States’ to not have to make a trade-off between protecting the planet or delivering economic and social benefits to its people. It is hoped that ocean action and the blue economy will garner increased attention at COP28, leading to a tidal wave of investment in our oceans. Ultimately, an increase in the health of our oceans will benefit all, much like how a rising tide lifts all boats.