Investing in the blue economy:
An ocean of impact potential
The global economy and ecology depend on thriving oceans
and clean water resources. Yet, the blue economy is facedwith ever-increasing challenges. Oceans are under threat
from pollution, population growth and climate change.
“Investors can help turn the tide, creating significant positive
impact. Neglecting the blue economy could worsen climatechange, endanger marine life, and threaten the livelihoodsof millions,” states Samy Muaddi, head of emerging markets
fixed income at T. Rowe Price.

Opportunities for meaningful impact
Healthy oceans and clean water are key aspects of the wellknown Sustainable Development Goals (SDGs) of the UnitedNations. SDG 6 focuses on clean water and sanitation, andSDG 14 on life below water and clean oceans. Despite theirimportance, these two goals are among the least funded SDGs.

Muaddi highlights the iconic photo of Earth taken fromthe Apollo spacecraft in 1972. The image underscores theimportance of Earth’s oceans, which cover more than threequarters of the Blue Planet. The oceans are crucial habitats fornumerous animal species and provide food for billions of people.

Muaddi explains, “The investment required to meet the UN
SDGs is now estimated at 5 to 7 trillion US dollars in annual
investment until 2030. A significant portion of this is linked tohealthy oceans and clean water.” To date, however, funding for
oceans has been limited, fragmented, and generally focusedon mitigating industry impacts, as reported by the AsianDevelopment Bank1.

Two-thirds of the global economy is moderately or highlydependent on ocean resources. More specifically, oceans
contribute 2.5 trillion US dollars to the global economy andsupport over 30 million jobs worldwide, according to the United
Nations Environment Programme Finance Initiative.

Governments and companies are increasingly addressing thethreats to the blue economy. The finance industry can play a
crucial role by catalyzing investments in projects that support
SDG 6 and SDG 14. For investors, this offers ample opportunities
to combine much-needed positive impact with financial returns.

Additionally, oceans are vital in maintaining our ecologicalbalance and climate. These ‘lungs of the earth’ have a naturalability to regulate the climate, producing half of the oxygen in
the atmosphere and absorbing around 30% of carbon dioxideemissions. Moreover, oceans are a vital source of protein for 3billion people.

A sense of urgency
The importance of the blue economy cannot be overstated.
Spanning diverse sectors such as fisheries, tourism, maritime
shipping, and renewable energy, the blue economy is pivotal
for global trade and sustenance. It also encompasses theavailability of freshwater, another point of growing concern.
Muaddi remarks, “I feel a sense of urgency. Since that photofrom the Apollo spacecraft, the world’s population has morethan doubled. Despite the collective efforts in clean water andocean initiatives, we are heading towards a global tragedy if we
don’t act. Impact investors can make a significant difference
here, especially in emerging markets, where the effects of adecline in resources of the blue economy are most acutely felt.”

An important social challenge: freshwater
scarcity
The blue economy’s role in ecology and climate is paramount.
Additionally, its social impact is significant as well, particularly
in coastal communities. Sustainable practices in fisheries andaquaculture are essential for food security and livelihoods formillions. Moreover, protecting marine ecosystems preservescultural and environmental heritage, vital for many communities.
A critical component of the blue economy is the availability offreshwater for people, industry, and agriculture. Muaddi states,“75% of our planet may be covered by water, but only 3% of thisis freshwater, and merely 1% is suitable for human and industrial
consumption.”
Due to population growth, increased economic activity, andclimate change, freshwater is becoming increasingly scarce.
According to the UN, over 2 billion people already lack accessto clean drinking water, especially in emerging markets. Accessto clean water is essential for health, food security, poverty
reduction, and economic stability. Additionally, good sanitation
is often lacking as well.

For investment professionals only. Not for further distribution.

Investing for the greater good
The shortage of clean water and sanitation disproportionately
affects the poorest populations, youth, and women globally.
The future appears challenging. Water use has been increasing
at more than double the rate of population growth, as per theUnited Nations. With the global population expected to reacharound 10 billion by 2050, this implies greater demand for foodand energy, both significant water consumers.
Muaddi notes, “Water scarcity will be one of the top challenges
for humanity in the next decade and a major risk to global GDP
growth. For instance, the World Resources Institute estimatesthat around 30% of the world’s GDP will be exposed to highwater stress by 2050, with around half of the global population
projected to live in water-stressed regions.”
Many of the challenges in the blue economy are interconnected,
concludes Muaddi. He believes that investors can make aninvaluable difference by investing in freshwater and sanitation
projects, as well as in healthy oceans. “The blue economy
offers investors ample potential for financial returns while
fulfilling commitments to environmental stewardship and socialresponsibility.”
T. Rowe Price and the International Finance Corporation(part of the World Bank Group) are partnering to grow theblue bond market to address the planetary and societal risks
posed by the current underfunding of the blue economy.
T. Rowe Price and the International Finance Corporation are
not affiliated companies.

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https://www.adb.org/news/features/qa-developing-blue-bond-market-healthy-oceans

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