Turnthetide:Howtofinanceasustainableoceanrecovery1Fundedby:TurningtheTide:HowtofinanceasustainableoceanrecoveryApracticalguideforfinancialinstitutionsTurnthetide:Howtofinanceasustainableoceanrecovery2AcknowledgementsAcknowledgementsAuthorsThisreportwasproducedthroughthecollaborativeeffortsoftheUNEnvironmentProgramme’sSustainableBlueEconomyFinanceInitiative(UNEPFISBE)projectteam.ProjectTeamDennisFritschProjectCoordinatorSustainableBlueEconomyFinanceUNEPFIMichaelAdamsAuthorOceanAssetsInstituteLucyHolmesAuthorWWFUSKlaasdeVosAuthorOceanFoxAdvisoryNicholasBruneauCommunicationsConsultantUNEPFIJessicaSmithEcosystemsLeadUNEPFIOleVestergaardProgrammeOfficerMarine&CoastalEcosystemsUNEPCaraWilsonCommunicationsLeadBanking&EcosystemsUNEPFIAdamGarfunkelEditorJunxionStrategyTodevelopthisguidance,UNEPFIhascollaboratedwithWWF,afoundingpartneroftheSustainableBlueEconomyFinancePrinciples,withaspecificfocusfromWWFontheseafood,marinerenewableenergyandcoastalandmarinetourismsectors,inadditiontotheprovisionoftechnicalinputacrossallfivesectors.Turnthetide:Howtofinanceasustainableoceanrecovery3AcknowledgementsTheUNEnvironmentProgramme’sSustainableBlueEconomyFinanceInitiativethanksallindividualsandorganisationslistedbelowfortheirsupportinthedevelopmentofthisseminalguidance.WorkingGroupWeareparticularlyindebtedtoallmembersoftheSustainableBlueEconomyFinanceInitiativeWorkingGroupfortheirsupportinthedevelopmentofthisreport.StevenAdlerOceanDataAllianceAukjeBerdenRabobankRikBeukersWorldBenchmarkingAllianceAlessandraBorelloEuropeanInvestmentBankFlavioCorsinAqua-SparkClaireCumminsClimateFundManagersAndredeAlmeidaSantosIndicoCapitalBrendadeSwartRabobankSimonDentMirovaNaturalCapitalMelissaGarveyTheNatureConservancyMaxGottschalkOcean14CapitalLukeHalseyAiiMPartnersBenHartWorldResourcesInstituteLouiseHeapsWWFUKMayaHennerkesEuropeanBankforReconstructionandDevelopmentMarenHjorthBauerFyndVenturesMarkHuangSeaAheadEmineIscielStorebrandAssetManagementTedJanulisInvestableOceansHugoLeBretonOcean14CapitalJuliaManningandteamEuropeanBankforReconstructionandDevelopmentSverreMartinsenFyndVenturesNathanielMatthewsOceanRiskandResilienceActionAllianceMattMcLuckiePlanetTracker/PosaidonJulieMillerBNPParibasDanaMillerOceanaJamesMitchellCentreforClimateAlignedFinance/RockyMountainInstituteStephanMoraisIndicoCapitalPippaMorganAvivaInvestorsRolandoMorilloRockefellerCapitalManagementGorjanNikolikRabobankHelenPackerWorldBenchmarkingAllianceKatherinePalmerLloyd’sRegisterNicolasPascalBlueFinanceOlivierRaybaudBlueOceansPartnersShallyShankerAiiMPartnersJonasSkattumSvegaardenKatapultOceanIoannaSkondraAmericanHellenicHullInsuranceAndrewSmithGreenbackersInvestmentCapitalLimitedStanislavSuprunenkoEuropeanBankforReconstructionandDevelopmentPieraTortoraandteamOrganisationforEconomicCo-operationandDevelopmentMelissaWalshandteamAsianDevelopmentBankJohnWillisPlanetTrackerTurnthetide:Howtofinanceasustainableoceanrecovery4AcknowledgementsExternalReviewersWeextendoursincerethankstoexternalexpertreviewerswhoprovidedsubstantialinsightandinformationtotheprojectteam.FranciscoBoshellInternationalRenewableEnergyAgencyBerndCordesGordon&BettyMooreFoundationAlexandreCornetWWFEuropeanPolicyOfficeTaniaCurryWWFUSSamDavinWWFCanadaValeriedeLiedekerkeWWFBalticEcoregionProgrammeAndrewDumbrilleWWFCanadaRandyDurbanGlobalSustainableTourismCouncilMaureenGeeseyMooreFoundationPierreYvesHardyWWFFrancePiersHartWWFUKMarcelKroeseWWFInternationalMadadhMacLaineZeroEmissionsMaritimeTechnologyAssociationMerrielleMacleodWWFUSElissamaMenezesWWFCanadaGeoffreyMuldoonWWFUSSimoneNiedermüllerWWFAustriaMauroRandoneWWFMediterraneanProgrammeHenrikeSemmlerWWFDenmarkMartinavonMünchhausenWWFGermanyThisworkwaspartiallyfundedbytheSwedishGovernmentviatheUNEnvironmentProgrammeSustainableBlueEconomyInitiative.Finally,wealsowanttothanktheFoundingPartnersoftheSustainableBlueEconomyFinancePrinciplesfortheircontinuedsupport.WORLDRESOURCESINSTITUTESuggestedCitationUnitedNationsEnvironmentProgrammeFinanceInitiative(2021)TurningtheTide:Howtofinanceasustainableoceanrecovery—Apracticalguideforfinancialinstitutions.Geneva.Copyright©UnitedNationsEnvironmentProgramme,2020.Thispublicationmaybereproducedinwholeorinpartandinanyformforeducationalornon-profitpurposeswithoutspecialpermissionfromthecopyrightholder,providedacknowledgementofthesourceismade.UnitedNationsEnvironmentProgrammewouldappreciatereceivingacopyofanypublicationthatusesthispublicationasasource.NouseofthispublicationmaybemadeforresaleorforanyothercommercialpurposewhatsoeverwithoutpriorpermissioninwritingfromtheUnitedNationsEnvironmentProgramme.ISBNNo:978-92-807-3848-3JobNo:DTI/2346/GETurnthetide:Howtofinanceasustainableoceanrecovery5ForewordForewordTakethetidewhileitserves“Thereisatideintheaffairsofmen,whichtakenattheflood,leadsontofortune…Onsuchafullseaarewenowafloat.”WilliamShakespeareShakespeare’swordswerenevermorepertinentthantothecircumstancesof2021.ThetidewillbeatitsfloodwhenwecongregateatCOP26inGlasgowinNovember,anditisfromtherethatwemayridetheblue-greencurrenttoacarbon-neutralworld.Ifwestaytruetoscienceandsetthelogicalcourserequiredforthesecurityofsucceedinggener-ations,wewillfinallybeputtinganendtothecruelyearsofdenialandappeasement.Ifthechallengeofgreaterambitionisprogressivelymetinthemonthsahead,wehaveeveryreasontobehopeful.Climatechangeisonthelipsofworldleadersingovernanceandbusiness,withcommitmentstoacarbonneutralworldmultiplyingandthecostofrenewableenergyplungingtomorethancompetitivelevels.Financialmarketsandconsumersaremovingtojointhisquantumshiftinthedirectionofasustainablefuture.Thesmartmoneyisonadecarbonisedeconomy,withthespectreofstrandedassetsinagrey-brownworldhauntingmanyaboardroom.In2015,allMemberStatesoftheUnitedNationsagreedtotheadoptionofSustainableDevelopmentGoal14(SDG14),toconserveandsustainablyusetheresourcesoftheocean.ThesustainableblueeconomywillbeattheheartofourimplementationofSDG14andwecanexpectthenextUNOceanConferenceinLisbontoholdusalltoaccountonprogress.Searchingquestionswillbeaskedastothedegreetowhichmajorindustriessuchasports,shipping,fishing,coastaltourismandrenewableenergyaredemonstratingsustainability.In2010,theblueeconomywasestimatedtostandataglobalgrossvalue-addedofUSD1.5trillion,afigurethatisexpectedtodoubleby2030.Theessentialpointinallsuchconsiderationsisthesustainabilityofwhatisbeingplanned.ItisinthiscontextthattheHigh-LevelPanelforaSustainableOceanEconomy’scallforallExclusiveEconomicZones(EEZs)tobesustainablymanagedunderSustainableOceanPlansby2030,issoseminal.Inmakingthiscall,thepanel’sfourteenservingheadsofstateandgovernmentcommittedtheirnationalEEZstobegovernedbySustainableOceanPlansby2025.Turnthetide:Howtofinanceasustainableoceanrecovery6ForewordEverythingisconnected,fromeconomiestoecosystems,fromindustrytobiodiversity,andthankstoinitiativesliketheTaskForceonClimate-RelatedFinancialDisclosures,PrinciplesforResponsibleBankingandPrinciplesforSustainableInsurance,thebank-ingsector,insurersandinvestorsarenowconsciousthattheirfinancialactivitiesimpactonthehealthoftheocean.Financialinstitutionsprovidethefinancing,investmentandinsurancerequiredtopowerocean-relatedsectors,thereforefinancialdecisionstakentodayimpactthelivesandlivelihoodsoffuturegenerations.Thisissobecauseclimatechange,pollution,habitatdestructionandover-exploitationoftheocean’sresourcesarecausingapalpabledeclineintheocean’shealth,andtherecannotbeahealthyplanetinthefuturewithoutahealthyocean.Itisthereforecriticalhereandnowthatfinancialflowsaredirectedtowardsthesustainabilityoftheblueeconomy.Thepublicationofthistimelyindustryguidanceprovidesapracticaltoolkitforfinancialinstitutionstopivottheiractivitiestowardsfinancingasustainableblueeconomy.Itofferseasy-to-followguidelinesonhowtoapproachclientsinfivekeyoceansectorschosenfortheirestablishedconnectionwiththefinanceindustry:maritimetransporta-tion,ports,seafood,coastaltourismandmarinerenewableenergy.Itgivesadetailedbreakdownofwhichactivitiestoseekoutasbestpractice,whichactivitiestochallenge,andwhichactivitiestoavoidfinancingcompletelyduetotheirdamagingnature.Theguidancecomplementsexistingframeworksandliterature,andisdesignedtobereadalongsidekeyreportssuchasRisingTide:MappingOceanFinanceforaNewDecadeandTheOceanFinanceHandbook:IncreasingFinanceforaHealthyOcean.Critically,itpointsthewaytotheSustainableBlueEconomyFinancePrinciples,thekeystoneforfinancingactivitiesintheoceaneconomy.Wideuseoftheseprincipleswillensureoceanfinanceisdeliveredwithsustainabilityatitscore,sothatprofitabilitygoeshand-in-handwithenvironmentalandsocialstewardship.Thefinancingprinciplescomplementpolicyanddecision-supportofUNEPtodeveloptransformativepathwaysandcomprehensiveoceangovernancetowardsoceansustainability.Isalutethemorethan50institutionswhoarealreadysignatoriesofthisinitiative,signallingtheircommit-menttotakeimmediateactiononthesustainabilityoftheoceaneconomyacrosstheirfinancialactivities.ForthesakeofSDG14’sfaithfulimplementation,forthehealthoftheoceanandthesecurityofgenerationstocome,IcalluponfinancialinstitutionstorecognisetheirconnectionandsignuptotheSustainableBlueEconomyFinancePrinciples.Onsuchafullseaarewenowafloat.PeterThomsonUnitedNationsSecretary-General’sSpecialEnvoyfortheOceanTurnthetide:Howtofinanceasustainableoceanrecovery7ContentsContentsAcknowledgements.................................................................................................................................2Foreword.................................................................................................................................................5Listoffigures..........................................................................................................................................9Listoftables............................................................................................................................................9Listofabbreviationsandacronyms......................................................................................................10Executivesummary...............................................................................................................................13Introduction...........................................................................................................................................15Context...............................................................................................................................................................15Whatisthesustainableblueeconomy?......................................................................................................16Aboutthisresource..........................................................................................................................................17Whatdowemeanbyfinanceforthesustainableblueeconomy?.........................................................17Intendedaudience............................................................................................................................................18Methodology.....................................................................................................................................................19Howtousethisguidance......................................................................................................................24Limitationsoftheguidance............................................................................................................................24Usingthesector-specificcriteria...................................................................................................................25Relationshiptootherresources.....................................................................................................................29Seafood.................................................................................................................................................30Sectorandfinancialoverview........................................................................................................................31Financingthesector........................................................................................................................................33Keyenvironmentalandsocialimpactsanddependencies......................................................................35Relationshiptoothersectorsoftheblueeconomy...................................................................................36Outliningmateriality.........................................................................................................................................41Criteriaforsustainablefinancing..................................................................................................................48Fromrisktoopportunity.................................................................................................................................48Casestudies......................................................................................................................................................50OceanEngagementFund–CreditSuisseandRockefeller.........................................................50Sustainability-linkedloans–Rabobank...........................................................................................51EquityinvestmentinsustainableaquacultureinAfrica–Aqua-Spark......................................52Ports......................................................................................................................................................53Sectorandfinancialoverview........................................................................................................................54Financingthesector........................................................................................................................................56Keyenvironmentalandsocialimpactsanddependencies......................................................................57Relationshiptoothersectorsoftheblueeconomy...................................................................................58Outliningmateriality........................................................................................................................................60Criteriaforsustainablefinancing..................................................................................................................63Fromrisktoopportunity.................................................................................................................................63Casestudies......................................................................................................................................................65ThamesGreenScheme–PortofLondonAuthority......................................................................65BestGreenSeaportAward–HAROPA.............................................................................................65Singapore’sMaritimeAccelerators...................................................................................................66Turnthetide:Howtofinanceasustainableoceanrecovery8Maritimetransportation67Maritimetransportation........................................................................................................................67Sectorandfinancialoverview........................................................................................................................68Financingthesector........................................................................................................................................70Keyenvironmentalandsocialimpactsanddependencies......................................................................70Relationshiptoothersectorsoftheblueeconomy...................................................................................72Outliningmateriality........................................................................................................................................74Criteriaforsustainablefinance......................................................................................................................75Fromrisktoopportunity.................................................................................................................................75Casestudies.....................................................................................................................................................78SustainabilityLinkedLoan(SLL)–Seaspan...................................................................................78Rewardingsustainabilityperformance–Maersk..........................................................................78Greenfinanceformultiplebusinessunits–BonheurShipping..................................................79CircularEconomyFinance–NavigarCapital.................................................................................79Marinerenewableenergy......................................................................................................................80Sectorandfinancialoverview........................................................................................................................81Anoteonfloatingoffshorewind,tidalandwaveenergy..........................................................................81Financingthesector........................................................................................................................................83Keyenvironmentalandsocialimpactsanddependencies......................................................................85Regionalexample:OffshorewinddevelopmentintheNorthSea..........................................................87Relationshiptoothersectorsoftheblueeconomy...................................................................................89Outliningmateriality.........................................................................................................................................89Criteriaforsustainablefinancing..................................................................................................................91Fromrisktoopportunity.................................................................................................................................92Casestudy.........................................................................................................................................................93Sustainabilitypolicyandreporting–Ørsted...................................................................................93Coastalandmarinetourism..................................................................................................................95Sectorandfinancialoverview........................................................................................................................96Financingthesector........................................................................................................................................97Keyenvironmentalandsocialimpactsanddependencies...................................................................100Anoteoncruising..........................................................................................................................................100Relationshiptoothersectorsoftheblueeconomy.................................................................................101Outliningmateriality......................................................................................................................................103Criteriaforsustainablefinancing...............................................................................................................104Fromrisktoopportunity..............................................................................................................................105Casestudy.......................................................................................................................................................106BeyondTourismInnovationChallenge–Inter-AmericanDevelopmentBank.......................106Concludingremarks............................................................................................................................108References..........................................................................................................................................110Turnthetide:Howtofinanceasustainableoceanrecovery9References110ListoffiguresFigure1:Guidancecreationflowdiagram........................................................................................................19Figure2:Criteriatableexplained........................................................................................................................28Figure3:Worldcapturefisheriesandaquacultureproduction(FAO2020)..............................................32Figure4:Geographicalspreadofproductionofseafood(FAO2020).......................................................32Figure5:Whichfinancialproductsdoesyourorganisationtypicallyworkwithintheseafoodsector?.................................................................................................................34Figure6:Porttypesbyvesselsandprimaryfinanciers.................................................................................55Figure7:Wheredoinstitutionsfinancingmarinerenewableenergycomefrom?...................................83Figure8:Chartofinvestmentinmarinerenewableenergybyfinancialinstrument(UNEPFI2021)................................................................................................................84Figure9:IntegratedmaritimespatialpolicymapoftheDutchNorthSeaEEZ(GovernmentoftheNetherlands,2016)..........................................................................................88Figure10:Ørstedmatrixofsocietalchallenges(Ørsted2019)......................................................................93Figure11:Wheredoinstitutionsfinancingcoastalandmarinetourismcomefrom?(UNEPFI2021)..............................................................................................................98Figure12:HowactiveareFIsacrosstheworldindifferentsectors?...........................................................98Figure13:Investmentincoastalandmarinetourismbyinstrument(UNEPFI2021)..............................99Figure14:Tourismsector’scontributiontotheeconomyin15Caribbeanstates(IDB2020b)............106ListoftablesTable1:Tableofimpactdefinitions.................................................................................................................22Table2:Tableofriskdescriptions....................................................................................................................23Table3:Pressuresandimpactsofseafood...................................................................................................41Table4:Overviewofseafoodrisksandmateriality.......................................................................................47Table5:Pressuresandimpactsofports........................................................................................................59Table6:Overviewofportsrisksandmateriality............................................................................................62Table7:Maritimetransportationsegments:Vesseltypes,ownership,financiers..................................68Table8:Pressureandimpactsofmaritimetransportation.........................................................................73Table9:Overviewofmaritimetransportationrisksandmateriality..........................................................74Table10:Risksandobstaclestodecarbonisationbystakeholder..............................................................77Table11:Pressuresandimpactsofmarinerenewableenergy....................................................................86Table12:Overviewofmarinerenewableenergyimpactsandmateriality.................................................90Table13:Pressureandimpactsofcoastalandmarinetourism................................................................102Table14:Overviewofcoastalandmarinetourismimpactsandmateriality..........................................104Turnthetide:Howtofinanceasustainableoceanrecovery10ListofabbreviationsandacronymsListofabbreviationsandacronymsADDacousticdeterrentdeviceASCAquacultureStewardshipCouncilAERaverageefficiencyratioBCblackcarbonBSEEBureauofSafety&EnvironmentalEnforcementCANARICaribbeanNaturalResourcesInstituteCARclimateadaptationandresilienceCBIClimateBondsInitiativeCFCschlorofluorocarbonsDPSIRdriver,pressure,state,impact,responseECEuropeanCommissionECAemissioncontrolareaEEAEuropeanEnvironmentAgencyEIBEuropeanInvestmentBankEJFEnvironmentalJusticeFoundationEPRextendedproducerresponsibilityEPSEasternPacificShippingESGenvironmental,socialandgovernanceESIEnvironmentalShipIndexESPOEuropeanSeaPortsOrganisationETCEnergyTransitionsCommissionETPendangered,threatenedandprotectedFAOFoodandAgricultureOrganizationoftheUnitedNationsFIfinancialinstitutionFoCflagofconvenienceFSAformalsafetyassessmentGLPGlobalInfrastructurePartnersGMFGlobalMaritimeForumGSTCGlobalSustainableTourismCouncilGWECGlobalWindEnergyCouncilHAROPAPortsofHavre,RouenandParisH&MhullandmachineryIAPHInternationalAssociationofPortsandHarborsIBPESIntergovernmentalPanelonBiodiversityandEcosystemServicesICCTInternationalCouncilonCleanTransportationICSInternationalChamberofShippingIDBInter-AmericanDevelopmentBankIEAInternationalEnergyAgencyIFREMERL'InstitutFrançaisdeRecherchepourl'ExploitationdelaMerTurnthetide:Howtofinanceasustainableoceanrecovery11ListofabbreviationsandacronymsILOInternationalLabourOrganizationIMOInternationalMaritimeOrganizationIPCCIntergovernmentalPanelonClimateChangeIRENAInternationalRenewableEnergyAgencyITWFInternationalTransportWorkers’FederationIUCNInternationalUnionforConservationofNatureIUMIInternationalUnionofMarineInsuranceIUUillegal,unreportedandunregulatedIWSAInternationalWindshipAssociationKPIkeyperformanceindicatorLDCsleastdevelopedcountriesLNGliquidnaturalgasM&AmergersandacquisitionsMARPOLInternationalConventionforthePreventionofPollutionfromShipsMCSTMicronesianCenterforSustainableTransportMSCMarineStewardshipCouncilMSPmarinespatialplanningNBIMNorgesBankInvestmentManagementNDCsnationallydeterminedcontributionsNGOnon-governmentalorganisationODAofficialdevelopmentassistanceOECDOrganisationforEconomicCooperationandDevelopmentOTECoceanthermalenergyconversionP&IprotectionandindemnityPLAPortofLondonAuthorityPMparticulatematterPPIAFPublic-PrivateInfrastructureAdvisoryFacilityPPPLRCPublic-Private-PartnershipLegalResourceCenterPRBPrinciplesforResponsibleBankingPRIPrinciplesforResponsibleInvestmentPSCportstatecontrolPSIPrinciplesforSustainableInsurancePWCPricewaterhouseCoopersSASBSustainabilityAccountingStandardsBoardSBEsustainableblueeconomySBEFISustainableBlueEconomyFinanceInitiativeSDGSustainableDevelopmentGoalsSIDSsmallislanddevelopingstatesSIMPSeafoodImportMonitoringProgramSSFsmallscalefisheriesSLLsustainability-linkedloanSMEsmall-andmedium-sizedenterprisesTEEBTheEconomicsofEcosystemsandBiodiversityTNFDTaskforceonNature-relatedFinancialDisclosuresUNCTADUnitedNationsConferenceonTradeandDevelopmentUMASUniversityMaritimeAdvisoryServicesUNEPUnitedNationsEnvironmentProgrammeUNEPFIUnitedNationsEnvironmentProgrammeFinanceInitiativeTurnthetide:Howtofinanceasustainableoceanrecovery12ListofabbreviationsandacronymsUNESCOUnitedNationsEducational,ScientificandCulturalOrganizationUNFCCCUnitedNationsFrameworkConventiononClimateChangeWHOWorldHealthOrganizationWISTAWomen’sInternationalShippingandTradingAssociationWPSPWorldPortsSustainabilityProgramWTOWorldTradeOrganizationWTTCWorldTravelandTourismCouncilWWFWorldWideFundforNatureZESTAsZeroEmissionShipTechnologyAssociation“Ouroceanprovidescountlessbenefitstoourplanetandisessentialforjobs,foodsecurity,healthypeopleandecosystems.Itproducesoverhalfoftheworld’soxygenandabsorbs50timesmorecarbondioxidethanouratmosphere.Ourdependenceonahealthyandresilientoceanarekeywhichiswhywearecommittedtothisinitiativeandtocontributetothetransitiontoasustainableoceaneconomy.Assomeonewhogrewupbythesea—inacountrythatreliesontheoceansfortwo-thirdsofitsexportrevenues—IknowthathealthyandresilientoceansarekeytoachievemanyoftheSDGsandthelong-termvalueofcompaniesinourportfolios.”JanErikSaugestad,CEO,StorebrandAssetManagementTurnthetide:Howtofinanceasustainableoceanrecovery13ExecutivesummaryExecutivesummaryTheoceancoversthemajorityofourplanet’ssurface,holding97%ofallwaterand80%ofalllifeforms.Majoroceansectorssuchastourism,shipping,fishing,aquacultureandmarinerenewableenergycollectivelycontributetoa‘blue’economy,estimatedbytheOrganisationforEconomicCo-operationandDevelopment(OECD)ataglobalgrossvalueaddedofUSD1.5trnin2010.ThisblueeconomyhasbeenprojectedtoincreasetoUSD3trnby2030,withsomeoceanindustriessettogrowfasterthantheglobaleconomy.However,oceanhealthisunderthreat,facedwiththetriplecrisesofpollution,naturelossandclimatechange,leavingindustries,businessesandlivelihoodsexposed.Withexistingfinancingstilllargelydirectedtowardsunsustainablesectorsandactivities,itiscriticalthatallsectorsoftheblueeconomyarerapidlytransitionedtowardssustain-ablepathways.Banks,insurersandinvestorshaveamajorroletoplayinfinancingthistransitiontoasustainableblueeconomy,helpingtorebuildoceanprosperityandrestorebiodiversitytotheocean.Throughtheirlending,underwritingandinvestmentactivities,aswellastheirclientrelationships,financialinstitutionshaveamajorimpactonoceanhealthandholdthepowertoaccelerateandmainstreamthesustainabletransformationofocean-linkedindustries.Thisseminalguidanceisamarket-firstpracticaltoolkitforfinancialinstitutionstopivottheiractivitiestowardsfinancingasustainableblueeconomy.Itoutlineshowtoavoidandmitigateenvironmentalandsocialrisksandimpacts,aswellashighlightingoppor-tunities,whenprovidingcapitaltocompaniesorprojectswithintheblueeconomy.Leveragingbestpracticebasedoninputfrommorethan50pioneeringinstitutionsandexperts,thisguidancesetsoutpathwaystosustainablegrowthacrossfivekeyoceansectors.Itpresentsadetailedbreakdownofwhichactivitiestoseekoutasbestpractice,whichactivitiestochallenge,andwhichactivitiestoavoidfinancingcompletelyduetotheirdamagingnature.Thisguidanceprovidesfinancialdecision-makersacrossbanking,insuranceandinvestmentwithascience-basedandactionabletoolkit,givingeasy-to-followrecom-mendationsonhowtoapproachfinancialactivityrelatedto:◾Seafood,includingbothfisheriesandaquacultureaswellastheirsupplychains;◾Ports;◾Maritimetransportation;◾Marinerenewableenergy,notablyoffshorewind;and◾Coastalandmarinetourism,includingcruising.Turnthetide:Howtofinanceasustainableoceanrecovery14Executivesummary“BecomingasignatoryoftheBlueEconomyFinancePrinciplesisthestartofourjourney.TheEBRDisinanidealpositiontofindsynergiesacrossoursectorsandstakeholders,todevelopinnovativeblueeconomysolutions.Allthemajorsectorsinwhichthebankisactivehavetheopportunitytocontributetotheblueeconomy.IstronglybelievethattheapplicationofthesehighstandardswillhelptheEBRDinexploringthepossibilityoftheissuanceofthefirstEBRDbluebond,inlinewiththeexperiencedevelopedbytheWorldBankandEIB.”AnnemarieStraathof,VPRisk,EuropeanBankforReconstructionandDevelopmentItbuildsonthefoundationoftheSustainableBlueEconomyFinancePrinciples(‘thePrinciples’),thekeystoneforfinancingactivitiesintheblueeconomy.Wideuseoftheseprincipleswillensureoceanfinanceisdeliveredwithsustainabilityatitscore,sothatprofitabilitygoeshand-in-handwithenvironmentalandsocialstewardship.Theguidanceiscomplementarytoexistingframeworksandliterature,includingUNEPFI’sPrinciplesforResponsibleBanking(PRB),PrinciplesforSustainableInsur-ance(PSI)andPrinciplesforPositiveImpactFinance(PI),aswellasthePrinciplesforResponsibleInvestment(PRI).ItcanbereadinconjunctionwithitssisterpublicationRisingTide:MappingOceanFinanceforaNewDecadewhichexplorescurrenttrends,frameworksandfinancialinstrumentsthataresuccessfullyaddressingoceansustain-ability,highlightingnewopportunitiesandgapsinthemarket.Turnthetide:Howtofinanceasustainableoceanrecovery15IntroductionIntroductionContextItiswellestablishedthattheoceanisavitaldriverofplanetarysystems,asourceofeconomicactivity,livelihoodsandfoodsecurity.TheIntergovernmentalPanelonClimateChange(IPCC)’s2019specialreportontheoceanandcryosphereinachangingclimatestates:“Inadditiontotheirrolewithintheclimatesystem,suchastheuptakeandredistributionofnaturalandanthropogeniccarbondioxide(CO2)andheat,aswellasecosystemsupport,servicesprovidedtopeoplebytheoceanand/orcryosphereincludefoodandwatersupply,renewableenergy,andbenefitsforhealthandwell-being,culturalvalues,tourism,trade,andtransport.ThestateoftheoceanandcryosphereinteractswitheachaspectofsustainabilityreflectedintheUnitedNationsSustainableDevelopmentGoals(SDGs)”IPCC2019Atthesametime,thehealthoftheglobaloceanisunderthreatfromhumanactivity,affectingclimatechange,pollutionandnatureloss,withexistingfinancingbeinglargelydirectedtowardsunsustainablesectorsandactivities.Financeforasustainableoceanremainslimited,withSDG14(LifeBelowWater)receivingtheleastpublicfundingoutofalltheSDGsin2017(SDGFinancingLab2017).Nevertheless,awarenessofthekeyservicesandprovisionsprovidedbytheoceanisincreasing,aswellastherecognitionthatcontinuedoceanhealthdeclineinhibitsprosperity(FriendsofOceanAction2020).Inanefforttoaddressthischallenge,therehavebeenanumberofimportantdevelop-mentsinrecentyears,notablythecreationoftheSustainableBlueEconomyFinancePrinciples(‘ThePrinciples’),whichsetouttodefinewhatfinancing1ahealthyandresil-ientoceanlookslike.Theseprinciplesaretheworld’sfirstglobalguidingframeworkforbanks,insurersandinvestorstofinanceasustainableblueeconomy(SBE).1Definedhereandthroughoutthisguidanceascapitaldeployedtowardsthesustainableblueeconomy,beitfrominvestment,insuranceorotherfinancialservicesprovidedbybanks,investorsand/orinsurancefirms.Turnthetide:Howtofinanceasustainableoceanrecovery16IntroductionWhatisthesustainableblueeconomy?TheSustainableBlueEconomyFinancePrinciplesdefineasustainableblueecon-omyasonethat“providessocialandeconomicbenefitsforcurrentandfuturegenerations;restores,protectsandmaintainsdiverse,productiveandresilientecosystems;andisbasedoncleantechnologies,renewableenergyandcircularmaterialflows”.Itisaneconomybasedoncircularity,collaboration,resilience,opportunityandinter-dependence.Itsgrowthisdrivenbyinvestmentsthatreducecarbonemissionsandpollution,enhanceenergyefficiency,harnessthepowerofnaturalcapitalandthebenefitsthattheseecosystemsprovide,andhaltthelossofbiodiversity.Generaleconomicactivityinthecontextofmarineandcoastalenvi-ronments,regardlessofsustainabilityconsiderations,isreferredtointhisguidanceastheblueeconomy.Bythisdefinition,andforthepurposesofthisdocument,thesustainableblueeconomyisagoalforthewiderblueeconomy,andthereforeexcludesnon-renew-ableextractiveindustries(e.g.offshoreoilandgas,anddeep-seamining)aswellasunsustainablepracticesinothersectors.However,considerationsofhowtotackletheseindustriesinthecontextofalonger-termtransitiontosustainabilitymaybedevelopedinfutureeditionsofthisguidance.TheypromotetheimplementationofSDG14(LifeBelowWater),andsetoutocean-spe-cificguidingprinciplesthatsupportthefinancialindustrytomainstreamsustainabilityofocean-basedsectors.ThePrinciplesweredevelopedbytheEuropeanCommission,WorldWideFundforNature(WWF),theWorldResourcesInstituteandtheEuropeanInvestmentBank.In2019theSustainableBlueEconomyFinanceInitiative(SBEFI)waslaunchedattheRegionalRoundtablesonSustainableFinanceinLuxembourg.Buildingonthemomen-tumofthePrinciplesandhelpingtranslateambitionintoaction,TheUNEnvironmentProgrammeFinanceInitiative(UNEPFI)hoststhenewplatformbringingtogetherfinan-cialinstitutions2(FIs)toworkwithscientists,corporatesandcivilsociety.TheaimistofacilitatetheadoptionandimplementationofthePrinciples,ensuringtheybecomeoperationalandusefulforfinancialinstitutionsworldwide.TheSBEFIseeksto:◾Positivelyinfluencemainstreamocean-relatedinvestment,insuranceandlendingtodrivedevelopmentthatunderpinsasustainableblueeconomy;◾CatalysefinancesectorengagementandpracticalactiontoadoptandimplementthePrinciples,deliverasustainableblueeconomyandsupporttheambitionsofSDG14(LifeBelowWater);and◾Developconcreteactionsandoutputsforinsurers,lendersandinvestorstoalignlend-ing,insuranceandinvestmentdecisionswithoceanhealth.2Afinancialinstitution(FI)isacompanyengagedinthebusinessofdealingwithfinancialandmonetarytransac-tionssuchasdeposits,loans,investmentsandcurrencyexchange.Inthecontextofthisguidance,thisincludesbanks,investorsandinsurers.Turnthetide:Howtofinanceasustainableoceanrecovery17IntroductionAboutthisresourceThePrinciplesprovideaframeworktoinformfinancialdecisionsrelatingtothesustain-ableblueeconomy.Ifwidelyadopted,thePrinciplescouldhelptotransformhowtheocean’sassetsareusedandmanagedtosecurehealthyecosystems,assuringfutureenvironmental,socialandeconomicresiliencewhileadvancingnature-basedsolu-tions.However,itiscriticalthatfurthersector-specificguidance,toolsandmetricsareprovidedtogivefinancialinstitutionstheresourcestheyneedtoadoptandimplementthePrinciplesandhavetangiblepositiveimpactsonthetransitiontoasustainableblueeconomyandoceanhealth.Whatdowemeanbyfinanceforthesustainableblueeconomy?Financialinstitutionscanplayapivotalroleindevelopingasustainableblueeconomy,soitisimportantthatthemeaningoffinanceforthesustainableblueeconomyisclearlydefined.Thisguidancedefinesitas“financialactivity(includ-inginvestment,insurance,bankingandsupportingintermediaryactivities)in,orinsupportof,thedevelopmentofasustainableblueeconomy,mostnotablythroughtheapplicationoftheSustainableBlueEconomyFinancePrinciplesinfinancialdecision-making,ESGframeworks,andreporting.”Assuch,itcoversbothfinancebeingdeployeddirectlytoinvestinSBEprojects(e.g.intospecificprojects)aswellasfinancialactivity/capitalbeingdeployedtosupportthedevelopmentoftheSBEmorebroadly(e.g.activitybyfinancialinstitutionstode-risk,promoteorfurthermainstreaminvestmentintheSBE).Whetherornotfinanceissustainabledependsontheactivitiesanddecisionsmadebyfinancialinstitutions,ratherthananyassessmentofthevirtueorvalueoftheinstitutionitself—provideditadherestotheSustainableBlueEconomyFinancePrin-ciplesandthesector-specificguidancewhenmakingitsdecisions.Thus,ontheseterms,abondissuancebyalargecorporationtofinancesustainableshippingisasvalidameansoffinancefortheSBEasanimpactfundinvestinginacommuni-ty-managedfishery,andoneisnot‘better’or‘moresustainable’thantheother.UNEPFIhasdevelopedthisguidanceonfinancingthesustainableblueeconomytocatalyseengagement.BuildingdirectlyonthePrinciplesandtheirethos,theguidanceseekstoapplythePrinciplesatamoregranularlevelacrosssectorsofthesustainableblueeconomy.Thepurposeoftheguidanceistoprovidesector-specificinformationtobanks,investorsandinsurersonhowtoavoidandmitigateenvironmentalandsocialTurnthetide:Howtofinanceasustainableoceanrecovery18Introductionrisksandimpacts,andmaximiseopportunitieswhenprovidingcapitaltocompaniesorprojectswithintheblueeconomy.Thisfirstversionoftheguidanceprovidesinsightsintofiveofthemostprominentsectors:◾Seafood,includingbothfisheriesandaquacultureaswellastheirsupplychains;◾Ports;◾Maritimetransportation;◾Marinerenewableenergy,notablyoffshorewind;and◾Coastalandmarinetourism,includingcruising.Thesesectorswereselectedduetotheirscaleandnatureaswell-establishedenginesoftheblueeconomyand,asaresult,theirestablishedinteractionswiththefinancesector,whichreadilyprovidescapitalandinsurance(thoughnotalwayssustainably)toeachofthem.Othersectorsofsignificancetothesustainableblueeconomythatremainatamoreemergentstage—suchasbioprospecting,bluecarbon,andconserva-tionfinance(e.g.forecosystemservices)—arenotincludedhere,butwillbeconsideredforfutureguidance.TheSBEFPframeworkandguidancecomplementsUNEP’sbroaderSustainableBlueEconomyInitiativetosupportholisticoceanpolicyandnature-basedsolutionsforsustainable,resilientandequitableblueeconomies.Thisrangesfromscience-basedknowledgeandinnovativedecision-supporttoolstopracticalguidanceandcapac-itybuildingtocountries,regionalseasandwide-rangingstakeholderstodevelopandnavigatetailoredtransformationpathwaystowardsoceansustainability.Theguidanceenablesengagementoffinancialinstitutionsandocean-linkedsectorsincomprehen-siveoceangovernanceandresourcemanagementatlocal,regionalandgloballevels,tacklingthetripleplanetarycrisesofclimatechange,biodiversitylossandpollutiontheoceanfacestoday.“AsafoundingpartneroftheSustainableBlueEconomyFinancePrinciples,WWFisproudtocontributetoamovementthatisbothvisionaryandpractical.ThePrinciplesenvisionafinancesectorthatisachampionofoceanhealthandapartnerofcommunitiesthatdependonahealthyoceanfortheirwell-being;theguidanceprovidestheroadmaptogetthere.”MargaretKuhlow.GlobalFinancePracticeLeader,WWFInternationalIntendedaudienceTheprimaryaudienceforthisguidanceisfinancialinstitutions(banks,insurersandinvestors)thatarecurrently—orlookingtobecome—activeinthesustainableblueecon-omy.Theguidanceaimstoprovideaninitialframeworkfortheseinstitutionstoconsiderhowsustainabilityimpactsandrisksspecifictotheblueeconomymanifestwithintheirownportfolios.Turnthetide:Howtofinanceasustainableoceanrecovery19IntroductionGiventhebreadthofthissubjectmatterandtherelevanceofsustainabilityconsider-ationstoabroadarrayofstakeholders,thisguidancemayalsobevaluableforthepublicsector,intergovernmentalorganisations,academia,civilsociety,commerceandindustry.MethodologyTheguidancewasdevelopedfollowingabottom-upapproach.The‘discovery’phase(Figure1,point1)entailedanextensiveliteraturereviewandexpertinterviews.Basedonthelatestscience,itidentifiedthesector’simpactsonenvironmentandsociety,avoid-ingduplicationofrelevantexistingresources.ImpactswereidentifiedusingamodifiedDPSIR3frameworkthatexamineddriversofimpactstemmingfromeachsector,thedifferentpressurestheseexertonenvironmentandsociety,andtheimpactsthesepres-surescreate.Whilepressuresareindividualtoeachsector,thecollectiveimpactsarecommonacrossallsectorsforwhichfinancingguidancehasbeencreated.Figure1:Guidancecreationflowdiagram3DPSIR(Driver,Pressure,State,Impact,Response)isaframeworktosystematicallyapproachimpactsanddescribetherelationshipbetweenhumanactivityandimpact.Itallowsforamorepreciseassessmentandunderstandingofhowactionsandactivitiesaffecttheenvironment.ItisbasedonamodeloriginallydevelopedbytheDutchNationalInstituteofPublicHealthandEnvironmentandlateradoptedbytheEuropeanEnviron-mentAgency(EEA)(IFREMER2004).Risingtide:Mappingoceanfinanceforanewdecade20IntroductionTable1clarifieswhatismeantbythecommonimpactsonenvironmentandsociety,outliningeachimpactandofferingexamplesonwhereitmaymaterialiseinpractice.EnvironmentalimpactsDescriptionExamplesLossorreductioninmarinebiodiversity,includinglossofendangered,threatenedandprotected(ETP)speciesLossorreductionofpopulationsofagivenspecies,orofaspeciesasawhole,duetohumanimpact.Thisincludesendangered,threatenedandprotected(ETP)speciesasdefinedbytheIUCNRedListofThreatenedSpeciesandprotectionsunderapplica-blejurisdictions.Thismayresultfromdirectoverexploitationsuchasoverfishing,orindirectlyasaconsequenceofotherimpacts,suchasthedestructionofhabitatorchangestobiologicalandchemicalcyclesonwhichspeciesmaydepend.LossofecosystemresilienceandprovisionofecosystemservicesLossorreductionintheabilityofanecosystemtoprovidespecificbenefits.Thesebenefits(termedecosystemservices)includeprovisioningservicessuchasoxygenproductionandcarbonsequestra-tion,andregulatingservicesfortheclimateandagainstdiseaseoutbreaks.Aparticularlyprominentecosystemserviceisclimateresilience(e.g.throughcoastalflooddefence),wherealossofresiliencehassignificantbearingontheabilitytoadapttotheimpactsofclimatechange.LossordegradationofcoastalandmarinehabitatsChangestothephysicalenvironmentonwhichlifedepends.Thismayresultfromtemporarydisturbancetotheseabedasaresultofdredgingortrawling,orfrommorepermanentchangeasaresultofconstructionwork(e.g.foroffshorewindfarms).ReductioninanimalwelfareTheconsequencesofhumanactivityonthehealthofindividualanimals,bothwildandfarmed.Itcomple-mentstheimpactonbiodiversity,whichlooksatimpactsongroupsofanimalsandspecies.Theseimpactsarecloselylinkedandoftenappeartogether.Reductioninanimalwelfareincludessourcesofstressformanyorganisms,typicallyasaresultofpollution.Thisincludesnoisepollutionfromship-ping,whichnotablyimpactsthewelfareofmarinemammals.Risingtide:Mappingoceanfinanceforanewdecade21IntroductionIncreasedGHGconcentrationsTheroleofgreenhousegas(GHG)emissionsincontributingtoclimatechange.Whilehumanactivityaffectstheclimateinmanyways,aswellasthecapacitytoofferresilienceoradapttoclimatechange,thisimpactcoverstheoutputofGHGemis-sionsintotheatmosphereitself,raisingconcentra-tionsthatresultinachangedclimate.Thisresultsfromabroadrangeofhumanactivity,includingemissionsfromvessels.Changestomarinebiological,chemicalandgeologicalcyclesTheconsequencesofchangestobiogeochemis-try—naturalprocesseswithintheoceansuchasthewater,carbonandnitrogencycles—thatplayaroleinregulatingtheplanet.Whiledependentonwaterchemistry,marinelifealsoplaysaroleinthesecycles.Assuch,thisiscloselylinkedtolossofecosystemservices,thoughtheconsequencesaresomewhatdifferent,focusingspecificallyontheseglobalregulatoryprocesses.Thismayresultfromspecificpollutantsthataffectmarinebiogeochemistry(e.g.sootorsulphurdiox-idesemittedbyvesselsintothewater).SocialimpactsDescriptionExamplesViolationofhumanrights,includingrightsofindigenouscommunitiesTheviolationofanyhumanright,includingtherightsofindigenouscommunities,intheprocessofdevelopingorfinancingagivensector.Thisincludesbothspecificandclearexamplesofhumanrightsviolationsaswellasmoresystemichumanrightsviolationssuchastheimpactofinequalityofoppor-tunitiesbetweensocialgroupsandgenders.Anexampleofviolationofhumanrightsincludesmodernslaveryinfishingorshipping.ReductionorlossofaccesstosustainableandinclusivelivelihoodsTheconsequencesofdevelopmentonanindividualorcommunity'sabilitytoattainandmaintainliveli-hoods.Thisimpactmaycovertheconsequencesofcommercialoverfishingonacoastalcommunity'sabilitytofishforthesamespecies.Risingtide:Mappingoceanfinanceforanewdecade22IntroductionIncreasedlikelihoodofinjury,diseaseorlossoflifeTheconsequenceofanactivityontheshort-andlong-termphysicalhealthofanindividualorcommu-nityasaresultofdevelopment.Thismayincludethehigherlikelihoodofinjuryasaresultofunsafedivetourismpractices,ortheincreasedprobabilityoffatalinjuryinunsafeconstructionofamerchantvessel.EconomicdamageandlossofproductivityWhilealloftheseimpactsultimatelyleadtosomeformofeconomicdamageandlossofproductivity,thisimpactspecificallyexaminesthedirect,prox-imateconsequencesofagivenpressureontheeconomicoutputandproductivityofanindividualoranenterprise.Thismayincludeeconomicdamagesandlossesasaresultofillegalfishingordiseaseoutbreakinaquaculture.Inequalityofopportunitiesonthebasisofage,sex,disability,race,ethnicity,origin,religionoreconomicorotherstatusInstanceswherethedevelopmentofasectorreinforcesorestablishesinequalityofopportunitieswithinandbetweencommunitiesandbetweenindi-viduals.Thisiscloselylinkedtotheimpactofhumanrightsviolations.Thismayincludegenderimbalancesincorporationsacrossblueeconomysectors,orracialdiscrimina-tioninemployment.Itmayalsoincludeunequaldistributionofcostsorbenefitsassociatedwithadevelopment,suchasatourismdevelopmentbenefittingnon-indigenous,wealthycommunitiesatthecostofmarginalisedanddisadvantagedcoastalcommunities.Table1:TableofimpactdefinitionsTurnthetide:Howtofinanceasustainableoceanrecovery23IntroductionAmasterlistofpressuresandimpactswasthendevelopedforeachsector(Figure1,point2).Theseweremappedagainstcurrentandpotentialriskstofinancialinstitutions,andthematerialityoftheseriskswasassessed.Therearefivecategoriesofrisk,ashighlightedinTable2,althoughpleasenotethatinmanyinstanceswhereariskfallsintomultiplecategories—forexample,achangeinregulationmaythenpresentoperationalrisks—onlythe‘source’riskisincluded.RiskDescriptionExamplePhysicalTherisktophysicalassets,oftenrelatedtotheimpactsofclimatechange.Increasedphysicaldamagetocoastalassets(e.g.hotelproperty)subsequenttotropicalcyclones.OperationalTheriskofinterruptionofongoingactivities,includingsupplychainoper-ations,logisticsandotherdisruptionofbusinessoperations.Disruptiontotourismbusinessopera-tionsduetocoralreefbleachingevents.MarketTheriskofchangestothemarketservedbyasectorordevelopment,includingshiftsindemandorsupply.Increasedconsumerdemandforsustainableseafoodoptions.RegulatoryTheriskofchangesintheregulatoryenvironmentaffectingthesector,includingchangesinhowitmaybetaxedorsubsidised.Policychangeonsulphurdioxideemis-sionswithinshipping.ReputationalTheriskofchangeinpublicpercep-tion,manifestingaspubliccampaigns,boycottsorpurchasingdecisions.Negativepresscoverageassociatedwithwindturbinenoisepollutiononmarinemammals.Table2:TableofriskdescriptionsThemostcriticalcategoriesofpressures(andtheimpactstheycreate)stemmingfromeachsectorweresummarised(Figure1,point3)alongsidethekeyrisksthattheseimpactscreateforfinancialinstitutions.Thisprioritisedsetofpressureswasusedtodevelopcriteria(Figure1,point4)forsustainablefinancinginthissector.Thesummaryofkeypressures,impactsandrisksformsthebasisofthisguidancedocument.4ThecriteriaarefeaturedintheaccompanyingCriteriaAnnexspreadsheets.Itisimportanttonotethattheresultantlistofcriteriaforeachsectorisnotacompre-hensivereviewofallsocialandenvironmentalpressuresrelatedtothatsector;thiswouldresultinanunworkablesetofguidanceforinstitutions.Rather,wherepressuresareunderstoodtobeentirelyrelatedtoaparticularsectorandtotheblueeconomy,theyareincludedunderthecriteria.Wherepressuresrelatetoasectorbutarenotuniquetoitortotheblueeconomy,theyarenotincludedsaveforthoseinstanceswherethepres-sureistoopressingtoexclude.4Themasterlistofpressures,impactsandrisksreferredtoinFigure1isavailableasatechnicalannexonrequest.Turnthetide:Howtofinanceasustainableoceanrecovery24HowtousethisguidanceHowtousethisguidanceThisguidanceisintendedasapractical,workingresourceforfinancialinstitutionstoassesstheirpotentialexposuretosocialandenvironmentalriskfactorswithinthesustainableblueeconomyandrecommendactionsbasedonindicatorsofthesocialandenvironmentalpressuresinthesesectors.Readersareencouragedtoexaminethechapterscoveringsectorsofinterestfromstarttofinishbeforeengagingdirectlywiththelistofcriteria,asthesechaptersprovidesector-specificcontextonthelinkagesbetweenpressures,impactsandrisksoutlinedintheMethodologysectionabove.Eachchapteralsoincludescasestudiesofcurrentbestpracticeandinnovativeapproachestofinancingsustainabilityinthedifferentsectors,aswellasindustryinsightssurfacedthroughtheguidance’scompanionreportRisingTide:MappingOceanFinanceforaNewDecade(UNEPFI2021)anditssurveyoffinancialinstitutions.Eachsectorhasitsownchapter.Chaptershaveastandardformatandthesamebroadcategoriesofinformationforconsistency.EachchaptercoverstherelationshipbetweenapressureanditsassociatedimpactsfollowingthemodifiedDPSIRframeworkdescribedintheMethodologysectionabove,buildingonthisunderstandingtohighlighthowandwhythesepressuresarematerialtofinancialinstitutionsandthetypesofrisktheyrepresent.Insomechapters—notablyseafood,wherethereissubstantialdifferen-tiationwithinthesectorbetweenfisheries,aquacultureandsupplychains—thesearebrokenintosub-sectors.5LimitationsoftheguidanceTheguidancedoesnotofferinvestmentadviceorreplaceexistingrequirementsforduediligencebyfinancialinstitutionswhenengaginginthesustainableblueecon-omy.Rather,thisresourceismeanttoguidefinancialinstitutionsthroughsomeofthecommonandcriticalsocialandenvironmentalchallengesfacingthesesectors,therebycomplementingexistingreportingframeworkstoassistinstitutionsintheirdeci-sion-makingregardingthesustainableblueeconomy.5Forexample,intheCoastalandMarineTourismchapter,theimpactsofcruiseshipsareincludedastheyclearlycompriseapartofthetourismsector.Ontheotherhand,aviation—thoughcloselylinkedtotourism’simpactsontheenvironmentandsociety—isnotuniquetotourism,anditsimpactsareexcluded.Climatechange,whichextendsbeyondeverysector,istreatedastoopressingtoexclude,andisthereforeincludedacrossallsectors.Turnthetide:Howtofinanceasustainableoceanrecovery25HowtousethisguidanceThoughtheguidancebuildsonthePrinciples,institutionsthathavesigneduptotheseprincipleswillnotbeassessedagainstthisguidanceinanyway,norareanyofitsrecom-mendationsmandatory.However,foreachsector,theguidanceandcriteriaforsustain-abilityshouldbeviewedintheirentiretyandtreatedasasingleresource.Selectingindividualcriteriaorindicatorsofbehaviouranddisregardingothersisstronglydiscour-agedtoensureasystemicandintegratedviewofsustainabilityintheblueeconomyand,critically,toensurethemanagementandmitigationofimpactsandrisks.Theguidanceshouldbeconsideredalivingresourceandworkinprogress,withimprove-mentsanditerationsovertimetoexpanditsscopeandapplicabilitytobeexpected.Assuch,thisdocumentdoesnotyetofferrecommendationsonbehaviourandbestprac-ticebeyondthefivesectorscovered;nordoesitofferspecificmetricsorbenchmarksforsustainabilityforindividualsectorsandtheirsocialorenvironmentalperformance.“AtGreenbackersweseemoreandmoreinvestorsbecomingincreasinglyconcernedabouttheplanet.Ithasneverbeenmoreimportanttomobilisetheworld’scapital.However,withoutavalidatedandalignedpathtodeploycapitalourambitioustargetswillremainapipedream.Wearepassionateaboutsavingtheplanetbyimprovinganddrivingdeal-flow.ThecreationandpublicationofthisUNEPFIguidancegivesourinvestorstheconfidencethattheircapitalwillhavethedesiredimpactonthesegoalsandweareproudtohavecontributedtotheirdevelopment”AndrewSmith,Director,GreenbackersInvestmentCapitalUsingthesector-specificcriteriaAfterreadingtheguidancechaptersandabsorbingtherelationshipsbetweenthesectors,theirimpactsontheenvironmentandsociety,andthematerialityoftheseimpacts,thereadercanturntothesector-specificcriteriaintheaccompanyingCriteriaAnnexspread-sheets.Thesebuildonthematerialityofthesector’simpactsandrisksandofferspecificrecommendationsdesignedtoincreasesustainability.Figure2explainsthesespread-sheetsusingthemarinerenewableenergycriteriaasanexample,andsettingouttheelementsoftheguidanceastheyapplytospecificareasandaspectsofsustainability.Asmentionedabove,somesectorsbenefitfrombeingbrokenintosub-sectorsfacingcommonissues(forexample,aquacultureinseafoodorfixedoffshorewindinmarinerenewableenergy).Wherethisoccurs,itisindicatedintheSub-sectorcolumn(Figure2,point1).Issuesandactivitiescommontoallsub-sectorsarelabelledas‘common’or‘cross-cutting’.Turnthetide:Howtofinanceasustainableoceanrecovery26HowtousethisguidanceTheCriterioncolumn(Figure2,point2)isdedicatedtothecriteriathemselves.Thesearebasedcloselyonthepressuresidentifiedintheguidancechaptersforeachsector,anddenoteasectionoftheguidanceconcerningaspecificpressure,activity,orsetofissues.IntheMarinerenewableenergyexamplebelow,thecriterionis‘Planningnewdevelopmentsandprojectlifecycle’—othersmaybe‘Stakeholderengagement’or‘Seabeddisturbanceandhabitatdisruption’—categoriesofactivities,pressuresandissueswithinasector.TheIndicatorscolumn(Figure2,point3)highlightsspecificcircumstanceswithinthecriterion’scategorythatarerelevantforafinancialinstitutiontoconsider—forexample,thepresenceofamarinespatialplanningprocessorhowthesitingofawindfarmwasdetermined.TheVerificationcolumn(Figure2,point4)providesguidanceonhowthestateofthisindicator(itspresenceorabsence)maybedetermined,andwhatinforma-tionsourcesarehelpful.Onthebasisofthepresenceorabsenceofanindicator,certainactionsarerecom-mended.TheActioncolumn(Figure2,point5)liststhreetypesofaction:◾Avoid,whereitisrecommendedfinancialinstitutionsdonotprovidefinancingduetotheseverityofagivenindicator;◾Challenge,wherefinancialinstititionsarerecommendedtoaddressaspecificissuehighlightedbyanindicator,forexamplethroughengagementwithacompanyorproj-ectdeveloper;and◾Seekout,whereanindicatordenotescurrentbestpracticeonaparticularissueandwherefinancingisencouraged.SomeindicatorsmaybeeitheranAvoidoraChallengedependingonthejurisdictionandstateofthemarket.Thesearedenotedas‘Avoid/Challenge(marketdependent)’withadditionalinformationprovidedintheRecommendationcolumn.TheRecommendationcolumn(Figure2,point6)providesadditionalcontextfortheaction.Specificlanguageisusedforeachrecommendedaction:◾Avoid—‘Donotfinance’;◾Challenge(forindicatorsthatarecriticaltoaddress)—‘Require’;◾Challenge(forindicatorsthatcanbeimprovedbutarenotcriticaltoaddress)—‘En-courage’;and◾SeekOut—‘Seekout’.Turnthetide:Howtofinanceasustainableoceanrecovery27HowtousethisguidanceTheRelevantprinciplescolumnandSDGtargetscolumn(Figure2,point7)linkthespecificindicatorstotherelevantSustainableBlueEconomyFinancePrinciplesandSustainableDevelopmentGoaltargets,respectively.TheResourcescolumn(Figure2,point8)offerslinkstofurtherreadingonthespecificissuesaddressedwithintherele-vantindicator.Forsectorswithmarket-leadingsustainabilitystandardsorbenchmarks,thereisanadditionalIncludedinmajormarketstandardscolumn.Itdenoteswhetherandwhereanindicatorintheguidelinescorrespondstoexistingsustainabilityframeworks.Thisisparticularlynoteworthyinseafood,whichreferencestheMarineStewardshipCouncil(MSC)andAquacultureStewardshipCouncil(ASC)standards,andintourism,whichreferencestheGlobalSustainableTourismCouncil(GSTC)standards.Referencestothesestandardsareshowninrelevantsectionsoftheguidancewherethesecorrespondwiththerelevantrecommendation,andshouldbeconsideredasaminimumbenchmark.“Providingtransparentandreliableimpactreportingintheblueeconomywillbeakeydriverofcapitalflow.”MaxGottschalk,FoundingPartner,Ocean14CapitalRisingtide:Mappingoceanfinanceforanewdecade28Howtousethisguidance12345678KEY:1.Sub-sectorsbreakdownthesectoralfocustoapplymoregranularity2.Thecriterionreferstoaspecificaspectofsustain-ability,closelylinkedtopressures3.Indicatorshighlightaspecificcircumstancewithinacriterionofrele-vancetoanFI4.Verificationsuggestshowthepresenceorabsenceofanindicatormaybedeter-mined5.Actionindicatesthetypeofresponsetomakebasedonthepresenceoftheindicator6.Recommendationprovidesmoredetailedstepstotakebasedontheaction7.RelevantPrincipleandRele-vantSDGtargetshighlightlinkagesbetweentheindica-torsandtheSBEFPandSDGsustainabilityframeworks8.ResourcesofferlinksforfurtherreadingaroundthetopicFigure2:CriteriatableexplainedTurnthetide:Howtofinanceasustainableoceanrecovery29HowtousethisguidanceRelationshiptootherresourcesThisguidanceisbroadlysupportiveof—andintendedtobeacomplementaryresourceto—existingframeworksforsustainablefinance,notablyUNEPFI’sPrinciplesforRespon-sibleBanking(PRB),6PrinciplesforSustainableInsurance(PSI)7andPrinciplesforPosi-tiveImpactFinance(PI),8aswellasthePrinciplesforResponsibleInvestment(PRI).9Withinthesectorsandwhereverpossible,explicitreferenceismadetothesynergiesandcomplementaritiesbetweenthisguidanceandtheSustainableBlueEconomyFinancePrinciplesonwhichtheyarebased,theSustainableDevelopmentGoalsandtheirtargets,andsector-specificleadingsustainabilitystandards.Thisguidanceisafirstattempttoprovideaguidingframeworkforsustainablefinanceacrossthefivesectorscovered.Itisaimedataverybroadaudience,andshouldbeconsideredahigh-levelframeworkforinstitutionstoapplywhenengagingwiththesustainableblueeconomy.Readersareencouragedtolooktoadditionalresourcesforfurthersupportonapplyingsustainabilityconsiderationsforspecifictypesofinstitutionsandfinancialservices.AnexampleisthePSIESGGuideforNon-LifeInsurance.10‘OurOceanisboththeheartandthelungofourplanet,yetitisunderunprecedentedthreatduetoclimatechange,over-exploitationandpollution.Thisguidancesetsthenewstandardforthefinancialworldtoprotectandrestoreourmostpreciouslivingtreasure.’OlivierRaybaud,Co-Founder&ManagingPartner,BlueOceansPartners6ThePrinciplesforResponsibleBankingareauniqueframeworkforensuringthatsignatorybanks’strategyandpracticealignwiththevisionsocietyhassetoutforitsfutureintheSustainableDevelopmentGoalsandtheParisClimateAgreement7ThePrinciplesforSustainableInsuranceserveasaglobalframeworkfortheinsuranceindustrytoaddressenvironmental,socialandgovernance(ESG)risksandopportunities—andaglobalinitiativetostrengthentheinsuranceindustry’scontributionasriskmanagers,insurersandinvestorstobuildingresilient,inclusiveandsustainablecommunitiesandeconomies.8ThePrinciplesforPositiveImpactFinanceareahigh-levelframeworktohelpfinanceandbusinessaddresstheSDGfinancingviaauniquelyholisticapproachtoimpactmanagement.9ThePRIistheworld’sleadingproponentofresponsibleinvestment.Itworkstounderstandtheinvestmentimplicationsofenvironmental,socialandgovernance(ESG)factors;andtosupportitsinternationalnetworkofinvestorsignatoriesinincorporatingthesefactorsintotheirinvestmentandownershipdecisions.10unepfi.org/psi/wp-content/uploads/2020/06/PSI-ESG-guide-for-non-life-insurance.pdfTurnthetide:Howtofinanceasustainableoceanrecovery30SeafoodSeafoodTurnthetide:Howtofinanceasustainableoceanrecovery31SeafoodSectorandfinancialoverviewTheseafoodsector—theproduction,processing,distributionandretailoffish,crusta-ceans,molluscsandotheraquaticanimals—isoneoftheworld’smostimportantfoodcommodities.Seafoodisproducedboththroughwildcapturefishingandaquaculture(orseafoodfarming)andtotalproductioniscurrentlyestimatedataround179mtonnesannually,wortharoundUSD401bnatfirstsalevalue11(FoodandAgricultureOrganisa-tionoftheUnitedNations[FAO]2020).Totalreportedwildcaptureseafoodproductionhasbeenbroadlystableforthepastfewyears,althoughin2018itreached96.4mtonnes,thehighestlevelrecordedandanincreaseof5.4%comparedtotheaverageofthepastthreeyears(FAO2020).Aqua-cultureproductionroseto82.1mtonnesin2018,anincreaseof37%since2010(FAO2020).Althoughaquaculturealreadymakesuparound46%oftotalreportedproduction(FAO2020),itisthefastestgrowingfoodsectorglobally(withannualgrowthestimatedat5.8%(FAO2018)),andisanticipatedtobethemeanstomeetthemajorityoffuturedemandforseafood(Figure3).Seafoodisalsothemosthighlytradedfoodcommodityglobally,accordingtotheWorldTradeOrganisation(WTO)(WTO2020),withexportsworthUSD164bnin2018(FAO2020),increasingbyanannualgrowthrateof4%inthelastfiveyears(Rabobank2019).China,NorwayandVietnamaretheworld’sbiggestseafoodexportersandtheEU,US,JapanandChinaarethebiggestseafoodimporters(Rabobank2019).Fishingandfishfarmingareundertakeninalmosteverycountryintheworld,withgreatdiversityintermsofspecies,technologiesandscale(Figure4).Insomecases,seafoodishighlyconsolidatedwithlarge,oftenverticallyandhorizontallyintegrated,companieswhoplayanoutsizeglobalrole.Forexample,13companiesaresaidtocontrolaround40%oftheworld’smostvaluablefisheries(Österblometal.2015).Ontheotherhand,upstreamactorstendtobefragmentedandsmallscaleandtypicallylocatedinemerg-ingeconomies.ThescaleofproductionrangesfromsmallsubsistentfisheriesinAfricatolarge,sophis-ticatedsalmonfarmingoperationsinNorwayandScotland,forexample.Intermsofemployment,lower-middleincomecountriesemployaround12millionpeople,whereashigh-incomecountriesemployaroundhalfamillion(OrganisationforEconomicCo-op-erationandDevelopment[OECD]2020).Inproductionsectorsalone,fishingandfishfarmingemployaround59.5millionpeople,withthemajorityindevelopingcountriesand85%inAsia(FAO2020).Globally,seafoodisavitalsourceofincome,employmentandfoodsecurityformanymillionsofpeople,particularlyincoastalandislandnations.1211AsperFAO(2020)seafoodproductioninthisdocumentreferstotheproduction(marineandinland)offish,crustaceans,molluscsandotheraquaticanimals,butexcludesaquaticmammals,reptiles,seaweedsandotheraquaticplants.12Formoreinformationonglobalseafoodsectorproductiontrendsanddatasee:TheStateofWorldFisheriesandAquaculture2020.Sustainabilityinaction(FAO2020)andSustainableOceanforAllReport:HarnessingtheBenefitsofSustainableOceanEconomiesforDevelopingCountries(OECD2020).Turnthetide:Howtofinanceasustainableoceanrecovery32SeafoodAquaculture–marinewatersCapturefisheries–marinewatersCaptureAquacultureAquaculture–inlandwatersCapturefisheries–inlandwaters020406080100120140160180Milliontonnes195019541958196219661970197419781982198619901994199820022006201020142018Figure3:Worldcapturefisheriesandaquacultureproduction(FAO2020)0102030405060MilliontonnesAv.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018Av.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018Av.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018Av.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018Av.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018Av.1950–1969Av.1970–1989Av.1990–2009Av.2010–2018ChinaAsia,excludingChinaAmericasEuropeAfricaOceaniaAquaculture–marineareasCapture–marineareasAquaculture–inlandwatersCapture–inlandwatersFigure4:Geographicalspreadofproductionofseafood(FAO2020)Turnthetide:Howtofinanceasustainableoceanrecovery33SeafoodFinancingthesectorBanks,investorsandinsurersallplayaroleintheglobalseafoodeconomy,providingcapitalandfinancialservicestocompaniesthroughoutthevaluechain,withvariationsintypesandsizeofproductsandservicesdeployed.Givenitsheterogeneity,itishardtomakeanygeneralisationsinthissector.Alongsidecommercialfinance,publicsectorfinanceisanimportantsourceoffundingforfisheriesandaquaculture.AccordingtotheOECD(2020),fisherieswasthesecondlargestrecipientsectorofofficialdevelopmentassistance(ODA)in2013–2018ofall‘ocean’sectors,receiving21.5%ofthetotal.Thesurveyoffinancialinstitutionsundertakenaspartofthisinitiative(UNEPFI2021)showsthetypesoffinancialinstitutionsandproductsthattypicallysupportseafood(Figure5).‘Workingcapitalloans’isthemostcommonfinancialproductavailabletothesector,followedby‘Projectbondsorfinancing’,‘Green/Bluelabelledbonds’and‘Corporatefinancing’,suggestingthatbanksarethemostimportantsourceofcapitalforseafoodcompanies.Morethanhalfofthetop100seafoodcompaniesareprivatelyowned(UndercurrentNews2019).Shareholdingswereconsequentlyreportedaslesscommonbyrespon-dents,anditisknownthatthereisalimiteduniverseofpubliclytradedseafoodcompa-nies(228intotalaccordingtoPlanetTracker(2016)).However,thesecompaniesrepresentpotentiallyuptoaquarterofthetotalrevenuefromtheseafoodsectorwitharoundUSD70bninseafoodrevenues(PlanetTracker2016).Shareholdersofthesecompaniesarecriticalplayersinshapingtheseafoodsector;companiestendtohavealargeglobalfootprintandareresponsibleformuchoftheworld’sseafoodtrade,process-inganddistribution.Unsurprisingly,thesurveysuggeststhattradefinanceplaysanimportantroleinmovingseafoodproductsaroundtheworld.Italsoindicatestherelevanceofprivateequity,whichisincreasinglyimportantinthissectorduetoanincreaseinmergersandacquisi-tions(M&A)andhorizontalandverticalintegration.Turnthetide:Howtofinanceasustainableoceanrecovery34SeafoodWorkingcapitalloansCorporatefinancing(inccorporatebondsandcorporateloans)Projectbonds/ProjectfinancePrivateequityTradefinance(inc.e.g.export-importguarantees)Green/BluelabelledbondsShares(i.e.activeorpassiveshareholding)InsuranceRiskmitigationinstruments(e.g.first-losscapital)DebtconversionFlexiblecapital(e.g.convertibledebt/equity)Donotknow02468101214Derivatives11Other1242245668912Whichfinancialproductsdoesyourorganisationtypicallyworkwithintheseafoodsector?Figure5:Whichfinancialproductsdoesyourorganisationtypicallyworkwithintheseafoodsector?Lastly,whilesurveysuggeststhattheinsurancesectorisnotactivelyinvolvedintheseafoodsector,andthereissomeevidencetosuggestthatinsurancecoveragefortheglobalseafoodsectorislow(WWF2019;FAO2009),thehazardousnatureofthecommercialfishingindustryandhigh-riskenvironmentinwhichitoftenoperatesmeansthatsomevesselownersandfishingcompaniespurchasemarineinsuranceinordertoprotectthemselvesagainstpotentiallosses.Thelikelihoodofafishingvesselactuallyhavinginsurancecoverdependsonanumberoffactorsincludingaccessibility,vesselsize,areaofoperationandlegalrequirements,butresearch(Milleretal.2016)hasshownthatevenvesselsinvolvedinillegal,unreportedandunregulated(IUU)fishingactivitiesmakeuseofinsuranceservices.Turnthetide:Howtofinanceasustainableoceanrecovery35SeafoodThethreetypesofmarineinsurancethatarethemostrelevanttothefishingindustryareprotectionandindemnity(P&I)insurance,hullandmachinery(H&M)insurance,andcargoinsurancewhenfisharetransportedbyseaintheholdsorcontainersofcargovessels.Onland,seafoodasaperishablegoodmaybeinsuredthroughoutthesupply-chainalongwithprocessing,transportandstorageequipmentandfacilities.Theseformsofcoveragemayalsoapplytofarmedproductsanddependingonthesizeofaquacultureoperations,insuranceprotectionmaybeprovidedforstock,livestock,liabil-ities,divers,andotherinsurableinterestsaswell.Lastly,insurancemayalsoplayanindirectroleinseafoodthroughtheinsuranceofbankloans.KeyenvironmentalandsocialimpactsanddependenciesWhiletheseafoodsectorisvitaltomanymillionsofpeopleintermsofjobsandfoodsecurityandplaysanimportantroleinmanyregional,nationalandlocaleconomies,itcanalsohaveasignificantnegativeimpactontheenvironmentandonlocalcommu-nities.Seafoodproductionhasbeenidentifiedasamajorcontributortooceanhealthdecline.TherecentIntergovernmentalPanelonBiodiversityandEcosystemServices(IBPES)report(2019)notesthatsincethe1970sdirectexploitation—mainlyfromfish-ingandland-usechange—hashadthelargestadverseimpactonmarineandcoastalecosystems.Impactsareheredividedacrossthesub-sectorsofseafood(fisheriesandaquaculture)aswellasthosethatcross-cutthesector.AccordingtotheFAO(2020),morethanathirdofmarinecapturefisheries(around32.4%)areover-exploited.Inaddition,fishingactivitieshavecontributedtothedeclineofnon-targetfishstocks,themortalityofcetaceans,marinemammalsandseabirds,andexacerbatedmarineecosystemdegradationduetodestructivefishingpractices.Illegal,unreportedandunregulated(IUU)fishingisrifethroughoutthefishingsector.Inadditiontoactingasamultiplierofothersocialandenvironmentalimpacts,itisthoughttocosttheindustryasmuchasUSD50bnannually(Sumailaetal.2020).Aquacultureoperations—whensitedinecologicallysensitiveareas—canimpactnega-tivelyonbiodiversityandecosystemfunctioning.Forexample,inpartsofSouth-EastAsiashrimpfarminghasledtotheclearanceofwetlandsandmangroveforests.Theextentofthedamagetomangrovehabitatscausedbyshrimpfarmingiscontested.Muchofthedamageishistoric,butstudiessuggestthatbetween5%and38%oftotalmangrovelosscanbeattributedtoshrimpfarming(Ashton2007).Aquaculturehasalsocontributedtothecontaminationofwaterbodiesinsurroundingecosystemsthroughchemicals,anti-microbialsandotherharmfulsubstances,forexam-ple,andimpactedwildspeciesthroughdiseaseandparasitetransfer(WWF2021).Sometypesofaquaculturehavealsoindirectlycontributedtothedeclineofwildcapturefish-eriesgiventhatfishmealproductionforfeedstillreliesheavilyontheprocurementofwild-caughtfish.Inaddition,soyforfeedproductionhasbeenlinkedtodeforestationinsoy-producingregionssuchastheAmazon(IUCN2017).Turnthetide:Howtofinanceasustainableoceanrecovery36SeafoodAcrosstheseafoodsector,socialissues—includinghumanrightsabuses,genderandracialinequalityandlowlabourstandards—haveincreasinglycometothefore.TheEnvironmentalJusticeFoundation(EJF)haveinvestigatedandreportedonsignificantabusesintheseafoodsectorincludingslavery,humantraffickingandforcedorbondedlabour(EJF2017).Additionally,thereisincreasingevidencethatthesesocialabusesarelinkedtoecologicaldeclineandfisheryover-exploitation,whichhaspushedthefishingsectortocutcornerstomakeupforrisingcostsandreducedincome,withdevastatingoutcomes(ibid).Otherpressuresontheenvironmentfromseafoodincludecarbonemis-sions,waterusageandfoodlossandwastealongtheseafoodsupplychain(FAO2021).Thedrivers,pressuresandimpactsonthemarineenvironmentandseafoodcommuni-tiesfromseafoodproduction,processinganddistributionareoutlinedinTable3.RelationshiptoothersectorsoftheblueeconomyFishingandaquaculturecanhavenegativeimpactsonotherblueeconomysectors,affectingtheirpotentialforsustainablegrowth,andbenegativelyimpactedbythoseothersectorsaswell.Forexample:◾Overfishingandmarineecosystemdeclinecannegativelyimpacttourismthatisdependentonhealthyfishpopulationsandmarinehabitatssuchascoralreefsfortheirrevenue;◾Mangroveclearanceforaquaculturecandecreasenaturalcoastalprotectionforcoastaltourismandothercoastaldevelopmentsectors;◾Offshorerenewableenergycanencroachonimportantfishinggroundsforthesectorifrobustplanningmeasuresarenotundertaken;and◾Wasteandwastewaterthatpollutescoastalareascannegativelyimpactfishpopulationsandtheavailabilityoffishforharvest.Turnthetide:Howtofinanceasustainableoceanrecovery37SeafoodPressuresImpactsAquacultureLocationandsitingoffarmsThesitingofaquacultureoperationsnear,in,orconnectedtomarineandcoastalhabitatscanleadtoland-usechange,deforestationandhabitatdegradation.Thiscanbeparticularlyacutewhenmulti-plefarmsarelocatedinthesameregion,multiplyingthepressureontheseecosystems.Insomecases,aquacultureoperationscanbesitedinorneartoprotectedareasincludingHighConservationValueAreas,orRamsarandUNESCOWorldHeritageSiteswherethepotentialforlossofessentialmarinehabitatsishigh.Whenaquacultureleadstodirectlandconversion,coastalandmarineecosystems,suchaswetlandsandmangroveforests,canbeaffectedandimportanthabitatsthreatened,degradedordestroyed.Thisleadstothelossofspeciesthatrelyonthem,including,insomecases,speciesthatareendangered,threatenedorprotected(ETP).Land-usechangeanddeforestationincoastalecosystemsdisruptstheirabilitytoprovidevitalservicestopeople,biodiversityandclimate.Forexample,mangrovesactascoastal'green'infrastructure,providingprotectionfromstormsurgesandflooding.Mangrovesarealsosignificantcarbonsinksandprovidevitalhabitatsandnurseriesforcommercialfishspecies.Coastalwetlandsprovidewatershedregulation,maintainwaterquality,arehabitatsforfishspecies,andalsostoreandsequestercarbon.PollutionandwatercontaminationAquacultureoperationscanuseharmfulchemicals,pesticidesandanti-microbialstocontroldiseaseorparasiteoutbreaks,deterpredatorsandcleannetsandpens.Thesecanthenleachoutintothesurroundingenvironmentaffectinglocalecosystemsandbiodiversity.Aquaculture,whenexceedingthecarryingcapacityofanecosystem,canleadtoeutrophicationinlocalwaterbodiesasaresultofefflu-entsfromfarmingoperationsthatcontainphosphorousornitrogen.Eutrophicationleadstoover-productionofplanktonthatconsumeavailableoxygen,suffocatingotherspecies(notablycommercialfishstocks)anddisruptingthebalanceoftheecosystem.InvasivespeciesandescapesAquacultureofsomemajorspecies,suchassalmon,canleadtoescapeeventswherefarmedfisharereleasedaccidentallyintothewild.Themixingoffarmedspecieswithwildspeciescanimpactlocalwildpopulationsthroughgenepooldilution,thespreadofdiseaseandpathogens,andincreasedcompetitionforscarcefoodresources.Escapeshaveadirectnegativeimpactonbusinessesthroughalossofrevenue.Turnthetide:Howtofinanceasustainableoceanrecovery38SeafoodSpreadofdiseaseandparasitesTheoutbreakandspreadofdiseaseisacommonoccurrenceinaquacultureandcanleadtowidespreadharvestlossesbothatindi-vidualfarmsandregionally.Diseasecanspreadrapidlyfromfarmtofarm,particularlywhenmultiplefarmsshareanunderlyingecosys-temorwaterbody.Over-stockedpondsorecosystemswithpoormanagementpracticesandlowlevelsofbio-securitycanexacerbatethescaleofdiseaseoutbreaks.Whenoutbreaksoccurinopen-netorpenfarming,diseaseorpatho-genscanspreadtolocalwildpopulationsputtingthematrisk,espe-ciallyiftheyarealreadythreatenedandunderincreasingpressuresfromotherimpacts,suchasfoodscarcityandclimatechange.UseofunsustainablemarineandterrestrialingredientsinfeedForsomespecies,farmingreliesontheharvestingofwildfishtosupplyrawmaterialstothefishfeedindustry.Ifthesefisheriesaremanagedpoorlythenfishfarmingcanindirectlyleadtotheover-ex-ploitationofwildfishpopulations.Asanalternativetomarineingre-dientsinfishfeedproduction,soyissometimesused,whichinsomeareasleadstodeforestation,land-usechange,lossofbiodiversityandecosystemfunctionality.Throughsoy-basedfeeds,land-usechangeanddeforestationalsoleadtoahighlevelofcarbonemissions.InteractionwithwildlifeandpredatorsTodeterpredators,farmsmaytakemeasuresthatdirectlyorindi-rectlyaffectwildlifepopulations,suchasusingacousticdeterrentdevices(ADDs).ResearchsuggestsADDscancausepaintoceta-ceansandcausemarinemammals(e.g.seals,dolphins,whales)toavoidareasthatmaybeimportantforfeeding,breedingandmigra-tion.Inaddition,wildlifecanbeaffectedthroughentanglementinnetsorropes.WildcapturefishingIllegal,unreportedorunregulated(IUU)fishingIUUfishingismorelikelytoleadtoindiscriminatefishingtechniquesthatoverfishtargetspecies,catchnon-targetspeciesandevenETPspecies,suchassharks,rays,turtlesandmanyothers,exac-erbatingmarinebiodiversityloss.IUUfishingactivitiesalsoincludesharkfinning,dumpingsharkcarcassesordumpingjuvenilefishtoincreaseyieldsoravoidquotas.IUUfishingisdefactounregulatedandunreported,andismorelikelytoleadtofisheriesbeingpoorlymanaged,over-exploitedandmarineecosystemsbeingdamaged.Thisleadstoadecreaseinecosystemresilienceanditsabilitytoprovideecosystemservices,includingmaintenanceoffishstocksatsustainablelevels.IUUfishingiscostlytotheindustryasawholeandtofisherymanag-ers.IUUfishingmakesfisheriesmanagementharder,asmanagersdon’tknowthetruelevelofexploitation,reducingtheprofitabilityoflegalfisheriesandimpactingonfishingopportunitiesforlocalcommunities.IUUfishingalsoleadstosignificantlossesingovern-mentrevenue,makingithardertomanageandenforcelegalfisheries.Inrecentyears,therehasbeenevidenceofbondedorslavelabouronIUUfishingvessels,insomecasesleadingtoserioushumanrightsabuses,includingphysicalandmentalabuseandevenmurder.Turnthetide:Howtofinanceasustainableoceanrecovery39SeafoodDestructiveandunselectivefishingpracticesDestructiveandunselectivefishingpracticescanleadtoincreasedmortalityofnon-targetspecies,legallyorillegally,includingthosethatareconsideredendangered,threatenedorareprotectedbylocalorinternationallaw.Unselectivepracticesalsoincentivisediscardingoflow-value,over-quotaornon-targetspecies,wherefisharecaughtbutthrownbackeitherdeadordying.Destructivefishingpractices,whetherlegalorillegal,canleadtothelossordeteriorationofmarinehabitatssuchascoralreefsthatsupportfisheriesandassociatedbiodiversity.Somefishingpracticesaffectcarbonstorageandreducecarbonsequestrationrates.Unselectivefishingpracticesthatcatchtoomanyfish,ortoomanylargefish,contributetotheinterruptionofnutrienttransfer,particularlyinlargepelagicspecies.OverfishingOverfishingisaresultoftoomuchfishingeffortdeployedonafishstocksuchthatitcannotsustainitselfovertime.Thiscanincludecatchingtoomanyfishoverallorcatchingexcessivefemalesandjuveniles,leadingtotoofewadultsinthepopulation.Overfishingcausesdeclinesofspeciesbiomassbelowscientificallyderivedsustainablelevels.Overfishingcanalsoresultinsignificantnegativeecosystemshifts.Forexample:whentoppredatorsareremoved,low-trophicspeciesabundancechangesandtheecologicalfoodchainisaltered;orwhenhabitat-formingspeciesareremoved,theecosystemasawholeisaffected.Whenfisheriesarenotmanagedatsustainablelevels,fishstockswilldeclineovertimeandaffectthefisheries’abilitytoremainproductive.Globally,theFAOestimatesthatmorethanone-thirdoffisheriesarefishedpasttheirmaximumsustainablelimit.Crucially,depletedecosystemsandfishstocksarelessabletowithstandclimatechangeshocksandstressors.Subsidiesthatpropupother-wiseunsustainableorunprofitablepartsofthefishingsector,bothintermsofinternationalanddomesticfishingfleets,contributetooverfishingandtheoveralldeclineinprofitabilityofthesector.Alossofecosystemresiliencefromoverfishingcanhavesignifi-cantfoodsecurityandlivelihoodimpactsincertaingeographies.Persistentoverfishingbelowcriticalstocklevelcanleadtolocalisedextirpationandeventheeconomiccollapseoffisheries,resultinginlossoflivelihoodsandnutritionsecurityforseafood-dependentcommunities.Turnthetide:Howtofinanceasustainableoceanrecovery40SeafoodAbandoned,lostordiscardedfishinggearFishingvesselsthatabandon,discardorlosefishinggearintheoceancancontributetothelossofbiodiversitybyimpactingonmarinemammals,sharks,turtles,fishpopulationsandotherspeciesthroughentanglementandso-called'ghost'fishingwherenetscontinuetocatchfishaftertheyhavebeenlost.AccordingtotheGlobalGhostGearInitiative,lostorabandonedfishinggearisknowntohaveimpacted40%ofknownmarinemammalspeciesthroughtheestimated640,000tonnesofgearlostatseaeachyear.Abandoned,lostordiscardedgearaddsover640,000tonnesofplastictothemarineenvironmenteachyear,furtherthreateningoceanhealthandmarineecosystemfunctionality,andindirectly,humanhealth.Ghostgearcausesthelossofcommerciallyvaluablefishstocks—afishlosttoghostgearisafishthatwillneverbreed,besoldorbeeaten.Cross-cuttingCarbonemissionsandwaterusageSeafoodproductscanhavehighcarbonemissionsduetoproduc-tion(e.g.fueluseforfishinggear,aerationorpumping),habitatdestruction(e.g.mangrovedestructionorseabedimpacts),andenergyfromprocessing,coldstorageandtransportationtomarkets(highestthroughairfreightforfreshfish).Itisworthnotingthatinsomecases,fishingismadepossiblebyfuelsubsidies,facilitatingoverfishing,destructivepracticesandnon-efficientuseoffuel.LabourconditionsHumanrightsabuseshavebeenlinkedtoseafoodproductionandprocessinginrecentyears.Insomepartsoftheworld,fishingvesselsarecuttingcostsbyusingforcedorindenturedlabourtoformthecrewsneededtoundertakefishingactivities.Inaddition,therehavebeenreportsofhumanandlabourrightsissues,includingbondedandchildlabour,andpoorworkingconditionsinseafoodprocessingunitsaroundtheworld.Womenandgirlsplayanimportantroleinseafoodproductionandprocessingandmakeupalargeshareofthepost-harvestworkforce.However,theirroleisoftenunrecognisedandunder-representedinofficialstatistics,meaningtheylackaccesstopublicsupportandcanbeexcludedfromdecision-making.Womenandgirlscanalsobesubjecttodiscriminatorypoliciesinseafoodcompaniesinwhichtheyaredirectlyemployed.Fishingandfarmedfishharvestingcanbedangerousactivities.Thedangerisexacerbatediffishingandfarmingoperationsdonotprovideadequateworkingandlivingconditionsforfisherycrewmembersorfarmworkers,arenotequippedtonavigatedanger-ousweatherordon’thavetheeconomicresiliencetochoosewhen,whereorhowtofishorfarm.LossandwasteofseafoodproductsProduction,processing,shippingandsellingofseafoodproductscanleadtolossandwastedueto:non-efficientuseoffeedonfarms;alackofhandling/slaughteringskills;alackofice/freezingcapacityonvesselsorfarms;lackofcold-chainstoragetogetproducttomarket;lackofmarketforby-productoroff-cutsduringprocessing;andwasteattheretailandconsumerendofthechain.Lossandwastecanleadtohigherlevelsoffarmingorfishingtogetthesameamountofproducttomarket,puttingadditionalpressureonnaturalresourcesandecosystems.Turnthetide:Howtofinanceasustainableoceanrecovery41SeafoodMarginalisationofcoastalcommunitiesandsmall-scalefishers/farmersLocalortraditionallivelihoodsofcoastalcommunitiescanbeputatriskbytheestablishmentofpoorlymanagedfishingorfarmingoperations.Infisherieswhereindustrialnationalorinternationalfleetsareabletolegallyorillegallyfishinwatersthataretradition-allyusedbycoastalfishingcommunities,over-exploitationandanunequalallocationofresourcescanoccur.Small-scalefisheries(SSF)aresaidtolandaroundhalfoftheworld'sseafoodandarebyfarthebiggestemployerintheblueeconomy.Impactingtheabilityofcoastalcommunitiestocontinuetofishcanalsoleadtopovertyandfoodinsecurity.Similarly,aquacultureoperationscanimpactexistingorhistoricaccesstonaturalresourcesforlocalcommunitieswhomaydependonthemforincomeand/orfoodsecurity.Aquaculturecanbeanunstablesourceofincomeandlivelihoodincaseswhereboomandbustcyclesareprevalentduetodiseaseoutbreaks,foodsafetyrecalls,ornaturaldisasters.Equally,rapidcommercialaquaculturedevelopmentcanimpactmoretraditionalproduction,givingrisetoresourceconflicts.Table3:PressuresandimpactsofseafoodOutliningmaterialityWhilethereisaclearmoralandsocietalimperativetomitigatetheenvironmentalandsocialdamagethattheseafoodsectorcancause,thereisalsoastrongbusinessratio-nale.Mostoftheseimpactsareself-defeatingandpresenthiddenorunaccounted-forbusinessandfinancialrisksthathinderthesector’slong-termviabilityandgrowthpoten-tial,andlimitprofitability.Perhapstheclearestexampleofthisisinwildcapturefisherieswheretheerosionofthenaturalcapitalbase(i.e.thefishstocksandtheirassociatedecosystems)onwhichfishingdependsisclearlyathreattotheprofitabilityandfuturepotentialofthesectorasawhole.FisheriesareconsideredtobeunderperformingassetsaccordingtotheWorldBank(2018)whoestimatelostpotentialduetopoormanagementandover-exploitationatUSD85bnayear.Bycontrast,theyestimateapotentialfora13%increaseinglobalharvestsiftheyweremanagedatsustainablelevels.PlanetTracker(2019)estimatedthatJapaneseseafoodcompanies,withacombinedmarketcapitalisationofUSD134bnin2019,facehiddenfinancialandreputationalriskfromunsustainablewildcapturefisheries.OnerecentstudyestimatedthatJapanesefisheriesalonecouldgenerateadditionalrevenueofuptoUSD1bnayearby2065,aswellastriplingprofitsandincreasingbiomass,ifcatcheswerereducedintheshorttermtoallowstockstorebuild(Tokunagaetal.2019).Theimpactsofoverfishing,fishingofendangeredspecies,humanrightsabusesandIUUfishingareincreasinglyapparent,creatingahighreputationalriskforcompaniesandfinancierswhoaredirectlyorindirectlyexposedtothesepractices.Marketsandregulatorsarereactingtotheserisksthroughtightercontrolsondomesticproductionstandardsandimportsandhighersustainabilitystandardsforendbuyers.Endmarketsarealsorespondingtoincreasedconsumerawarenessoftheplightoftheocean.TheMarineStewardshipCouncil(MSC)(MSC2019)suggeststhat83%ofglobalconsumersTurnthetide:Howtofinanceasustainableoceanrecovery42Seafoodagreeontheneedtoprotecttheoceanforfuturegenerations.TheEUandUShaveledinthisregard,butincreasinglymarketslikeJapanaremovingtowardstighterregulatorymeasuresandincreasingconsumerawarenessoffisheryissues.Intheaquaculturesector,oneofthebiggestcoststotheindustryfrompoormanage-mentandregulationisdisease,whichissaidtohavethepotentialtocostthesectoraroundUSD6bnayear(Stentiford2017).InThailandandVietnam,theshrimpsectorhassufferedeconomiclossesduetodiseaseofmorethanUSD5bntodate(Shinnetal.2016).Diseaseoutbreaks—particularlywhentheyaffectwholeproducingregions—canaffectmarketsupplyanddemandaswellasprices.Thishasbeenseeninbothsalmonandshrimpmarketsoverthepastdecade.Insomecases,wherethecarryingcapacityforfarmedspecieshasbeenexceededandmanagementpoor,thishasledtodeteriora-tioninthequalityandviabilityoffarmingoverall.PlanetTrackerresearchsuggeststhatshouldbusinessasusualinthesalmonindustrycontinue,currentproductionforecastsforcoastalfarmedAtlanticsalmon(towards2025)maybeoutby6%to8%,i.e.,produc-tionmightbeworthUSD4.1bnlessthanpredicted(PlanetTracker2020).“IwelcomeUNEPFI’s‘TurningtheTide’reportasanimportantstepinencouragingandfacilitatingthefinancingofouroceans.AswehavehighlightedinourownPlanetTrackerreports,theoceaneconomyisanessentialfactorinourunderstandingofplanetaryboundaries.Thisreportmakesakeycontributiontoguidingfinancialinstitutionsintobluefinance”.RobinMillington,CEO,PlanetTrackerInteractionwithwildspecies—suchasinsalmonfarming,wherediseaseandescapescanbecommonandcostly—alsoattractsnoticefromthemediaandNGOs.Deforesta-tionanddestructionofcoastalmangroveforestsandwetlandsfromshrimpfarming,particularlyinSouth-EastAsia,hasalsocaughttheattentionofawidearrayofNGOs.Aswithwildcapturefishing,marketsareincreasinglydemandingcertifiedandtrace-ablefarmedproducts.TheAquacultureStewardshipCouncil,astandardsettingbodyforresponsibleaquacultureproducts,reportedthatnearly18,000productswereabletocarrytheASClogoaroundtheworldthrough2019,a380%increaseinfiveyears(Aqua-cultureStewardshipCouncil[ASC]2020).Whilegreatstrideshavebeenmadeinthepastfewdecadesbyseafoodcompanies,governmentsandNGOstoidentify,manageandmitigateenvironmentalandsocialimpactsandrisks,thereisstillmuchtobedonetotransitionseafoodtoasustainableandviablesectorthatisabletodeliverreturnstobusinessesintothefuture,particularlywhenclimatechangeimpactsareconsidered.Sustainableseafoodisnotonlythemostresponsiblefinancialpropositionbutalsothemostprudent.Banks,investorsandinsur-ersneedtounderstandthepotentialrisksassociatedwith‘businessasusual’intheseafoodsectorandseekopportunitiestoplayaroleinsupportingthetransition.Table4outlinesthekeyrisksassociatedwitheachpressureandimpactarisingfromtheproduc-tion,processing,distributionandsaleofseafood.Forinformationaboutthedifferentriskcategories,seetheMethodologysectionoftheIntroduction.Turnthetide:Howtofinanceasustainableoceanrecovery43SeafoodPressuresImpactsRisksAquacultureLocationandsitingoffarmsRegulatoryCarbonemissionsassociatedwithcoastalhabitatdestruction,particularlythroughmangrovesandwetlandsarehigh.Withscope3emissions(i.e.thoseemittedthroughacompany’ssupplychain)oncoursetobetakenupbymarketsdemandingdisclosure,carbonemissionsinseafoodproductionandsupplychainswillbecomeamaterialissueforseafoodcompaniesandFIsneedingtomeasureandmanagecarbonemissions.MarketSeafooddemandmarketsareincreasinglyawareofthelinksbetweenseafoodproduction(particu-larlyshrimpfarminginSouth-EastAsia)andlandconversion/mangrovedeforestation.Marketactorsareunderpressuretocommittodeforestationandconversion-freesupplychains.PhysicalLossofmangrovesandwetlandscanleadtoincreasedriskfromfloodingandstormsurgestolocalfarmsandbusinesses.Asaquacultureopera-tionsareoftenfamily-runsmallbusinessesinemerg-ingeconomies,theydon'thavefinancialresilienceorinsurancetosmooththecostsofdisruptionorre-building.PollutionandwatercontaminationReputationalWatercontaminationandeutrophicationcausedbyaquacultureisahigh-visibilityissuewiththemediaandNGOs,affectingthereputationoftheindustry.RegulatoryRegulationsontheuseofchemicals,pesticidesandfeedsaretighteninginproducingmarketsinresponsetoincreasedpressurefromNGOs,localcommunitiesandmedia.Theriskoffinesforcompaniesnotmeet-inghighstandardsisanincreasingrisk.MarketFarmedfishthathasbeenoverlyexposedtoharm-fulchemicals,pesticidesorantibioticsareatriskofbeingdetrimentaltohumanconsumptionandrejectedbyimportingmarketswithhighfoodstan-dards.Thisisparticularlyrelevantwhereanti-micro-bialresistanceemerges.InvasivespeciesandescapesReputationalEscapeeventsoftenmakemediaheadlines—forexampleinUK,NorwayandChile—causingreputa-tionaldamagetotheindustry.OperationalEscapeeventsleadtosubstantialeconomiclossesforfarmersduetolostharvestpotential.Turnthetide:Howtofinanceasustainableoceanrecovery44SeafoodSpreadofdiseaseandparasitesReputationalSpreadingdiseaseandparasitestowildpopulationsisahighlyvisibleissueinaquacultureforsomespecies,particularlywildsalmon.OperationalBiosecurityanddiseasepreventionandcontrolaremajorproblemsforaquaculture.Uncontrolledspreadcanleadtosevereeconomiclossesduetomitigationcostsandharvestlossatproductionlevel.Diseasecausessupplyanddemanddisruptionandpricevolatilityacrossthesupplychain.Theaggre-gatednatureoffarmsinparticularregionsmeansthatlossescanbeacrosswholesupplymarkets,pushinguppriceselsewhere.UseofunsustainablemarineandterrestrialingredientsinfeedReputationalDeforestationinsoy-producingcountriesisahigh-vis-ibilityissuewiththepotentialtocreatemediaandNGOpressure.MarketSeafooddemandmarketsaremovingtowardsmakingithardertoimportproductswithillegaldeforesta-tionintheirsupplychainandareintroducingmarketmeasures,suchasASCcertification,thatincludeprovisionsformarineandterrestrialfeedingredients.OperationalPoorlymanagedfisheriesthatareunderhighdemandforlow-valueandlow-trophicfishspeciestosupplythefeedindustrycanbequicklyover-ex-ploited,puttingpressureontheabilityofthefisherytocontinuetosupplyrawmaterialsataffordableprices.InteractionwithwildlifeandpredatorsReputationalThecullingofpredatorsinfishfarminghasledtoNGOcampaigns.RegulatoryNegativeimpactsonendangered,threatenedandprotectedspeciescouldresultinaquaculturepolicyreformsorregulationsandforcedshutdownofopera-tionsintheworstcases.Turnthetide:Howtofinanceasustainableoceanrecovery45SeafoodWildcapturefishingIllegal,unreportedorunregulated(IUU)fishingReputationalIllegalfishingandassociatedhumanrightsabusesandenvironmentalimpacthavebeenthesubjectofmultipleNGOandmediacampaigns.Theissuehasextremelyhighvisibility,puttingcompanies’reputa-tionsatriskwithpotentiallegalrepercussions.RegulatoryInresponsetothepervasivenessandseverityoftheissuesassociatedwithIUUfishing,regulatorymeasureshavebeenintroducedinkeyseafooddemandmarkets.TheseincludethoseincorporatedwithintheUSSeafoodImportMonitoringProgram(SIMP)andtheEUCatchCertificationScheme,whichiscomplementedbyaproceduretoidentifynon-EUcountriesasnon-cooperatinginthefightagainstIUUfishing.RegulationsarebeingintroducedinotherkeydemandmarketssuchasJapan.Inaddition,providingfinancialservicestoIUUfish-ingvesselsmaymakecompaniesliabletocriminal,civil,oradministrativesanctionsandassetrecoveryactions.Forexample,companiesbasedbothwithintheEUandintheUKhavelegalresponsibilitiestoensuretheyarenotsupportingIUUfishing.MarketSeafoodbuyersintheUS,EUandJapanarerespond-ingtoreportsofillegalityandhumanrightsabusesbydemandinghigherlevelsoftraceabilityandcertifi-cation.OperationalWhereIUUfishingleadstorapidover-exploitationofcriticalnaturalresourcesthatunderpinthesector,itpresentshighriskstothecontinuedviabilityofbothindividualcompaniesandthesectorasawhole.DestructiveandunselectivefishingpracticesReputationalDestructivefishingpracticesleadtothedamageofcriticalmarinehabitatssuchascoralreefs,andcanleadtohighmortalitylevelsofETPspecies.AssuchtheyhavethepotentialtobethebasisforNGOandmediacampaigns.RegulatoryInresponsetothepervasivenessandseverityoftheharmfulenvironmentalissuesassociatedwithdestructivegear,regulatorymeasurescouldbeintro-ducedinkeyseafooddemandmarkets.MarketSeafooddemandmarketsareincreasinglyrequiringsustainabilityassurances.Fishsourcedfromsuppli-ersthatusedestructivefishingpracticesareunlikelytomeetmarket-leadingstandards.OperationalDestructivefishingpracticesleadtothedamageofecosystemsthatarethebasisofthefishingsectorandputtheviabilityofseafoodproductionandsupplychainsatrisk.Turnthetide:Howtofinanceasustainableoceanrecovery46SeafoodOverfishingRegulatoryFisheriesthatareover-exploitedarelikelytoeventu-allyfacecontrolregulationssuchasmoratoria,finesandpenalties.MarketMarketsareincreasinglyrequiringassuranceofsustainabilityandbestpracticemanagement,includ-ingtheuseofcertificationschemes.Marketsareincreasinglywantingfisheriestobesourcedtranspar-entlyandsustainably.Thosethatarenotoperatingorsourcingfromsustainablefisheriesstandtoloseoutasdemandforsustainableproductincreases.OperationalFisheriesthatareover-exploitedwillnotbeabletosustainfishingoverthelongterm.Morethantwo-thirdsofglobalfisheriesarealreadyover-ex-ploitedorfishedattheirmaximumlevel.Evidenceisbeginningtoshowhowseafoodcompaniesareatriskduetoover-exploitationofnaturalresourcesintheformofsupplycrunches,pricevolatilityandcompetitionforrawmaterial.Abandoned,lostordiscardedfishinggearReputationalPollutingactivitiesanditemsarecurrentlyhighlyvisibleissuesinthemediaandamongconsumers—particularlyplasticspollution,asubstantialportionofwhichisfromfishinggear.TherearealsospecificNGOinitiativestargeting'ghostgear'thatisresponsi-bleforcatchingETPspecies.RegulatoryPossiblemandatorynetidentificationschemestoenableidentificationbycompetentauthoritiescouldcomeintoeffect.Thismaybelinkedtofinesandpenaltiesforthosefoundresponsibleforabandoned,lostordiscardedgear.Cross-cuttingIssuesCarbonemissionsandwaterusageMarketScope3emissionsareoncoursetobetakenupbymarketsdemandingdisclosure.CarbonemissionsinseafoodproductionandsupplychainswillbecomeamaterialissueforseafoodcompaniesandFIsneed-ingtomeasureandmanagecarbonemissions.RegulatoryFuelsubsidiesmayberemovedfromfishingfleets.Thiscouldincreaseoperationalcostsandleadtoapotentiallossofincomeandsupplyofseafood.PhysicalAquacultureandfishingoperationsareoftenexposedtoextremeweatherevents,causedbyincreasingclimatechangeandbeinglocatedinhigh-riskcoun-triesandregions.Loweconomicresilienceandlackofaccesstoriskfinancemeanslossescanbesignificant.Turnthetide:Howtofinanceasustainableoceanrecovery47SeafoodLabourconditionsReputationalThereishighvisibilityofsocialandlabourabusesandhumanrightsviolationsinthefishingsectorasaresultofNGOcampaigns.Majorseafoodcompaniesandretailershavebeentargetedandcourtcaseswithfineshaveoccurred.RegulatoryRegulationsaroundtraceabilityandillegalityareinplaceinmajorseafoodimportingmarketssuchastheUSandtheEU.MarketSeafooddemandmarketsareincreasinglyrespond-ingtohigh-visibilitysocialissuesinseafoodproduc-tionandprocessing,demandingtransparencyandtraceabilityasaprerequisiteforbuying.LossandwasteofseafoodproductsOperationalLossofseafoodproductsalongthevaluechainaccountforsubstantialeconomiclossesandlossofopportunitiesforhigherincomesandhigherqualityproductsenteringintomarkets.Companiescouldmakebetteruseoftheby-productsandwasteinseafoodsupplychains,thusderivingmoreincomefromrawmaterials.Insomeemergingmarketscoldchainstorageisamajorconstrainttomaintainingqualityofseafoodproducts,andrejectscanbehigh.Marginalisationofcoastalcommunitiesandsmall-scalefishers/farmersReputationalTheplightofcoastalcommunitiesisamajorconcernforglobalenvironmentaldevelopmentandconser-vation-focusedinstitutionsandNGOs.Governmentsareparticularlymotivatedbythesocio-economicresilienceofcoastalpopulations,particularlyinlightofCovid-19impactsandpressures.Table4:OverviewofseafoodrisksandmaterialityTurnthetide:Howtofinanceasustainableoceanrecovery48SeafoodCriteriaforsustainablefinancingBasedontheimpactsandtheirmaterialityoutlinedabove,theattachedCriteriaAnnexforthesustainablefinancingoftheseafoodsectorisproposed.Thislistofcriteriaandtheirassociatedindicatorsofferrecommendationsforfinancialinstitutions.Theserecommendationsareto:avoidtheworstscenarios,challengeareasforimprovement,orseekoutbestpractice.Theseafoodcriteriaaregroupedintoaquacultureandwildcapturefisheriescriteria,giventhedistinctimpactsandrisksthatthesedifferentmodesofseafoodproductionpresent.Therearealsoanumberofcriteriarelatingtocross-cuttingimpactsandrisks,giventhatseafoodsupplychainscanincludeproductsthatcomefrombothwildandfarmedorigins.RefertotheCriteriaAnnexformoredetailedinformationFromrisktoopportunitySustainableseafoodoffershugeopportunity.Notonlydoesitprotectandrestoremarineecosystems,contributingtooceanhealthandresilience,italsoprovidesjobsandfoodsecurityforcoastalcommunitiesandincomeandrevenueforlocaleconomies.Banks,investorsandinsurerscanmakethemostoftheseopportunitiesbyprovidingfinancialproductsthatsupportbusinessesintheseafoodsectortogrowandprospertowardsasustainablefuture,helpingtheworldtoachievetheSustainableDevelopmentGoals.Financialinstitutionshavesignalledthattheybelievetrendstowardsmoresustainableseafoodoutcomesarewherethefuturelies.SurveyresultsfromarangeofFIsshowanumberofkeytrendsinfisheriesandaquaculture—notablytowardsgreatereffortstomakewild-caughtfishingsustainable,certificationinbothfisheriesandaquaculture,andreducingthenegativeenvironmentalimpactofaquaculture(UNEPFI2021).Turnthetide:Howtofinanceasustainableoceanrecovery49SeafoodTherearealreadyexamplesoffunds,bonds,loansandinsuranceproducts,amongstothers,thatarefinanciallysupportingprojectsandbusinessestoflourishandworktowardsgreaterimplementationofsustainabilityoutcomesintheseafoodsector.SpecialisedimpactfundssuchasAqua-spark,theMirovaSustainableOceanFund,8F,Ocean14Capital,theCreditSuisse/RockefellerOceanEngagementFundandtheBlueImpactFundaretargetingsustainableseafoodopportunitiesinbothwildcaptureandaquaculturesectors.CompaniessuchasMowiandGrieg,bothinthefarmedsalmonsector,haverecentlyissuedgreenbondstofinancetheirsustainabilitystrategies(Mowi2020;GriegSeafood2020).AndtheWorldBank,inpartnershipwiththeCaribbeanRiskInsuranceFacilityandothers,hasdevelopedaninsuranceproductforlocalfishingandaquaculturecommu-nitiesthatfaceincreasinglyextremeweatherevents(WorldBank2019).In2017,agroupofinsurancecompaniescommittedpubliclytotakeactionagainstIUUfishingandpledgedtonotknowinglyinsurevesselsofficiallylistedfortheirinvolvementinIUUfishing(OceanaandUNEPFIPSI2018).Therehavealsobeenanumberofsustainability-linkedloansforseafoodcompanieswhichhaveincludedsustainabilityKPIsaspartoftheloanperformance.Thefollowingcasestudiesillustratesomeexistingeffortstofinancesustainableseafood.“Wearecommittedtoprotectingtheoceanbygloballyscalingupsustainableland-basedRASsalmonfarmingtodelivercleanandhealthyfish.Ahealthyoceanandtheprotectionofmarineecosystemsandmarinebiodiversityarecrucialforeffectiveclimatechangemitigationandforthewell-beingofourplanetforgenerationstocome.8FAssetManagementandPureSalmonareproudtobeFoundingSignatoryandSupportingOrganisationtotheSustainableBlueEconomyFinancePrinciples.”StéphaneFarouze,Founderof8FAssetManagement,ChairmanofPureSalmonTurnthetide:Howtofinanceasustainableoceanrecovery50SeafoodCasestudiesOceanEngagementFund–CreditSuisseandRockefeller13InSeptember2020CreditSuisse—incollaborationwithRockefellerAssetManage-ment—launchedanovelinvestmentfundcalledtheOceanEngagementFund.TogetherwiththeOceanFoundation,theequityfundwillfocusonSDG14(LifeBelowWater)withagoalofhelpingtorestoreglobaloceanhealth,includingthroughtheseafoodsector,whilegeneratingpositivereturnsforinvestors.Fundmanagerswillactivelyengagewithinvesteecompaniesandencouragethemtotakestepstomitigateharm-fulimpactsandmovetowardssustainablepractices.TheOceanFoundationwillhelpCreditSuisseandRockefellerdefinetheuniverseofcompaniesforthefundandtheframeworkforengagement.Thefundwillhaveaconcentratedportfolioofaround30to50stocksandtogetherwiththeengagementstrategy,thefundmanagersbelievethatthefundwillbeabletoout-performtheglobalequitymarketsoverthelong-term.By31December2020,thefundhadraisedUSD320m.TakeawayInvestorswhoactivelymanageportfoliosthatincludeblueeconomycompanies,notonlyareabletoplayadirectroleinsupportingcompaniesinthetransitiontosustain-ability,butalsobeatthemarketatthesametimebymanagingandmitigatingkeyrisksarisingfromsocialandenvironmentalimpacts.“AtClimateFundManagerswerecognisetheneedtocollectivelyrespondtotheclimatecrisisinapurposefulandsustainableway,throughinnovationandthoughtleadership.Weareproudtopromotethisguidanceasameanstoadvancingthesustainablefinancing,developmentandmanagementoftheocean,theworld’sseventhlargesteconomy.”AndrewJohnstone,CEO,ClimateFundManagers13CasestudywrittenonthebasisofpersonalcommunicationwithRockefellerAssetManagement(2021).Turnthetide:Howtofinanceasustainableoceanrecovery51SeafoodSustainability-linkedloans–Rabobank14In2019Rabobankissuedoneoftheworld’sfirstsustainableloanswithintheseafoodsector.WorkingalongsideWWFChile,withwhomtheyhavebeeninpartnershipsince2012,RabobankissuedaloantoAgrosuper,Chile’sleadingsalmoncompanyandtheworld’ssecond-largestsalmonproducer.Theseven-yearagreementforaUSD100mloantofinanceAgrosuper’sacquisitionstrategycamewitharangeofenvironmentalandsocialkeyperformanceindicators(KPIs)attached(Seafoodsource2019).TheseincludedprovisionsforincreasingASCcertification,gettingfarmsintoimprovementprogrammes(withagoalofreaching100%ofitsproductionsites),andcommitmentstoreduceantibioticuseandimprovesocialconditions(ibid).InJanuary2021,Rabobankstructuredtwoadditionalsustainability-linkedloansintheChileansalmonsector(UndercurrentNews2020).ThefirstiswithBlumar,oneofthemainanimalproteincompaniesinChilewithapresenceinthecapturefishingandsalmonfarmingbusiness.Thisdealistheresultofyearsofdiscussionswithshare-holdersandseniormanagementtofindthemostadequatecapitalstructureforBlumarforitsnewstageofsustainabledevelopment.TheagreedfinancialsolutionisaUSD300msustainability-linkedloaninwhichtheclientcommitstoimproveitssustainabilitystandardsthroughoutthelifetimeoftheloan,includingKPIsrelatedtocleanenergy,carbonfootprint,antibioticuseandwastemanagement,amongstothers.Rabobankledagroupoflocal(BCIandSecurity)andinternational(DNBNorskeandSantander)banksthatendorsedthestructure,itssustainability-linkedloanprinciplesanditsKPIs.Thislandmarkdealrepresentsoneoftheveryfirstsyndicatedsustainability-linkedloansinChileandthefirstoneinfoodandagriculture.ThesecondtransactioniswiththeChileansalmoncompanyVentisquerosforUSD120mtofinancegrowthtowardsitsoutputtargetof60,000tonnesofsalmon(Under-currentNews2020).Theloan,providedbyRabobanktogetherwithDNB,alsocomeswithsustainabilitytargetstoalignthecompany’sgrowthwithincreasingmarketdemandforsustainableseafood.Ventisqueroshascommittedtoimprovingitssustain-abilitystandardsthroughoutthelifetimeoftheloan,includingKPIsrelatedtoantibioticuse,ASCcertification,cleanenergy,andcarbonandwaterfootprint(ibid).Thisloanprogrammeisapromisingstepintherightdirectiontowardsimprovementsinaqua-culturepracticesinChile.TakeawayBankscaninfluenceacompany’ssustainabilityjourneybyincludingenvironmentalandsocialKPIsintoloancontracts,helpingtomanageandmitigaterisksandincreaseoverallsustainabilityperformanceofthecompany.Toensuresuccess,itisimportantforcompaniesinvolvedtobetransparentintheirreportingofcompliancewithsustain-abilitytargets.14CasestudywrittenonthebasisofpersonalcommunicationwithRabobank(2021)andadditionalsourceaslistedinthetext.Turnthetide:Howtofinanceasustainableoceanrecovery52SeafoodEquityinvestmentinsustainableaquacultureinAfrica–Aqua-Spark15Aqua-Sparkisthefirstfunddedicatedtoinvestinginsustainableaquaculture.AssuchAqua-Sparkinvestsonlyincompaniesthatsolvearealsustainabilityproblem,haveacollaborativeattitudeandarepositivetowardssustainablebestpractices.In2015Aqua-SparkmadeanequityinvestmentinChicoa,agreenfieldtilapiafarminMozam-bique,acountrywherenearlyhalfthechildrenundertheageoffivesufferfrommalnu-trition,butalsoacountrythatsincetheendofthecivilwarhashadanannualGDPgrowthof7.5%.Chicoahasgrownintoaverticallyintegratedcompanywithaproductioncapacityofapproximately2,000tonnesandthefirstaquaculturecompanytoundertakeananal-ysisoftheirprospectiveout-growerprogram.Thegoalistofurthergrowto20,000tonnes,halfofwhichistoberealisedthroughout-growerprograms.In2016Aqua-SparkinvestedinIndianOceanTrepang,acommunity-basedseacucumberproducerinMadagascar.ThroughtheseinvestmentsAqua-Sparkdemonstratedthatitispossi-bletogeneratehealthyreturns,while,amongothers,increasingfoodsecurity,creat-ingclimate-resilientjobsandreducingpressureonred-listedspecies.Aqua-Sparkalsoincorporatessocialcriteriaintopipelinedevelopment,includingtreatingallworkersfairly,providingthemwithsafeandhealthyworkingconditions,equalpayandconditionsforwomen,andaccesstomaternityrights.Theseconsiderationsareparticularlyimportantgiventheprevalenceofapracticeknownas‘sexforfish’,throughwhichfemalefishtrad-ersoffersexualfavoursfromfishersinreturnforfishtosellandmakemoney.Aqua-SparkiscurrentlyraisingequitycapitalforitsAfricaFund,aimingforaUSD50mclosein2021.TheAfricaFundwillbededicatedtoinvestinginsub-SaharanAfricanaquaculture,takingminoritystakesincompaniesacrossthevaluechainandsupport-ingtheirgrowthbothdirectlyandthroughadedicatedtechnicalassistancefacility.TakeawayInvestmentopportunitiescanbefoundthatcouplehighlevelsofenvironmentalandsocialimpactwithpositivereturnsifsustainabilitycriteriaareembeddedintheinves-tor’smissionfromtheoutset.15CasestudywrittenonthebasisofpersonalcommunicationwithAqua-Spark(2021).Turnthetide:Howtofinanceasustainableoceanrecovery53PortsPortsTurnthetide:Howtofinanceasustainableoceanrecovery54PortsSectorandfinancialoverviewPortsaregatewaysfordevelopment,globaltradeandmaritimeinnovation,andbeinglocatedatsealevel,theyareonthefrontlinesofclimatechange.Portsareclustersofcompaniesandhubsofeconomicactivity.Withstrongscaleandscopeadvantagestheyareidealhubsforsustainablemaritimeinnovationandhavebecomeakeypartofdevelopmentstrategiesemployedbymanynations(RodrigueandNotteboom2020).Theregulationofshipping,fishingandothermaritimeactivitiestakesplaceattheworld’sports.Thereforethescopeofthisguidanceembracesallportfunctionsandassets,stoppingshortoftheshipyardandrecyclingsegmentscoveredintheMaritimeTrans-portationchapter.Ancillaryservicessuchaspilotage,towage,wastereception,mooring,onshorepower,bunkering,technicalnauticalservices,cargohandling,logistics,ware-houseandtransporttohinterlandarealsowithinthescopeofthisguidance.Withtheexceptionofpilotage,mostoftheseservicesareinprivatehands.Portsareoftencategorizedbytheirprimarycustomers:Containers,FuelTankers,CruiseShips,Fishing,PrivateVessels/Marinas(‘pleasure’).AshighlightedinFigure6below,thesearetypicallystructuredandfinanceddifferently.Regardlessofcustomers,portsizeorlocation,themesofsustainability,resilienceandinnovationconvergeatports.Indeed,severalSDGscanbeconnectedwiththeroleofports,inparticularSDG9(Indus-tryandInfrastructure),SDG13(ClimateAction),SDG14(LifeBelowWater)andSDG17(Partnerships).Greenandresilientportsarevitalfordevelopingnations,asgatewaysfordevelopment—andashubsfortrade,fishingandtourism.Assuch,theyareofcentralimportancetotheSustainableBlueEconomyFinancePrinciples.Turnthetide:Howtofinanceasustainableoceanrecovery55PortsDominantVesselsPublicPrivateTypicalStructure1Container◾Governmentowned◾Leasedtoprivateoperator◾Publicinfrastrcturefinance2Tanker◾Governmentorprivatelyowned◾Leasedtoprivateoperator◾Publicinfrastructurefinance3Cruise◾Governmentorprivatelyowned◾Leasedtoprivateoperator◾Cruiseoperatorsparticipateinfinance4Fishing◾Governmentorprivatelyowned◾Leasedtoprivateoperatororco-op◾Cruiseoperatorsparticipateinfinance5Pleasure◾Governmentorprivatelyowned◾Leasedtoprivateoperator◾PrivatefinancebyoperatororclubFigure6:PorttypesbyvesselsandprimaryfinanciersTheworld’stop50portscontrol70%oftheglobalcontainerbusiness(IAPH2018).Ofthetop20ports,15arelocatedinAsia,with40%ofglobalmarketshare(ibid).China’sMaritimeSilkRoadisdrivingportinvestmentandacquisitionsacrossAsia,EuropeandAfrica(Huoetal.2019).Giventhehighstrategicanddevelopmentvalueofports,itisimperativethatfinancialinstitutionspaycloseattentiontotheneedsofthissector.Portgovernanceisacomplexissue,asmostportsarepubliclyowned,withoperationsleasedtoprivatecompanies.InEuropeforinstance,87%ofportsareunderpublicowner-ship(ESPO2016a).Furthermore,some44%ofEuropeanportauthoritiesmanagemorethanoneport—and59%arenationallyowned,with33%ownedbymunicipalities(ibid).TheCovid-19shocktoglobaltraderepresentsthelatestchallengetoportgovernanceasmanagerstrytoadapttofreshenvironmentalandsocialchallenges(PortEconom-ics2020).Inlightoftheabove,financialinstitutionsmustdealwithseveralentitiesinaregulatedenvironment.Regulationsareimposedatseverallevels:local,nationalandinternational.PortStateControl(PSC)istheinspectionofforeignshipsinnationalportstoverifycompliancewithInternationalMaritimeOrganization(IMO)16regulations(IMO2019a).Similarregulatoryregimes,includingnationalcustomsandenvironmentalstan-dards,requireportstoinspectvesselsinvolvedinfishing,energy,miningandscientificresearch.Thisgivesportsakeyroleinthemonitoringandcontrolofshippingactivitiesandanopportunitytodevelopassustainabilityleaders.16InternationalMaritimeOrganizationistheUnitedNationsspecializedagencywithresponsibilityforthesafetyandsecurityofshippingandthepreventionofmarineandatmosphericpollutionbyships.Turnthetide:Howtofinanceasustainableoceanrecovery56PortsThemanychallengestoportstoday—decarbonisation,alternativefuels,resilience,vesselsize,urbangrowth,inlandtransportation,digitalisation,security,wastemanagement—translateintocomplexinfrastructuredemandsthatgofarbeyondsimplyincreasingcapacity.Globaltradeisforecasttodeclineby9.2%in2020,followedbyariseof7.2%in2021(WTO2020a).PriortotheCovid-19pandemic,globalportgrowthwasestimatedat3.4%perannumfor2019–2024(UNCTAD2019).Innovationisdisruptingandimprovingmanyportfunctions,withtrendsincluding:arti-ficialintelligence,autonomousvessels,cybersecurity,digitalisationandsmartshipping(Lloyd’sMaritimeAcademy2019).LeaderslikethePortsofSingaporeandRotterdamaresupportingblueeconomyinnovationwithdedicatedinvestmentfundsandtechni-calassistance(PortXL2020;TechStars2020).Europe’sDUALPortsInitiativeaimstodecarboniseportsbyintegratingcleanenergyanddigitalsystems—offsettingeconomicdependenceonthefossilfuelindustry(DUALPorts2020).FinancingthesectorFinancingthesechallengesisanequallycomplexarrayofstakeholders:banks,projectfinanciers,insurers,privateequityfirms,infrastructurefunds,developmentbanksandindustrialconglomerates.Thelong-termnatureofmostprojectsmeansthatESGissuesmustbeanticipated,otherwiseaprojectmayrunafouloffutureregulationsorindustryneeds.However,portsaretiedtoglobaltradecyclesandaconsolidatingshippingindus-try(UNCTAD2020).Toreducetheserisks,blendedfinanceapproachesareoftenused(Convergence2020).Publicfinanceoftenplaysanimportantrole,giventhepredom-inantlypublicownershipandstrategicvalueofports.Thedemandforassetclasseswhereimpactcanbemeasuredandmultipliedacrosssectors,infact,givesportsaccesstocapitalalignedwithbothsustainabilityandgrowth.Nationalpoliciestowardsportinfrastructurefinancevary.Researchshowsthatthepublicsectorfunds63%ofthetopcontainerports(PortReformToolkit2021).Privatefinanceisrequiredforthosewhosegovernmentsdonotconsiderportsaspartofthenation’stransportationinfrastructure.Asprivatesectorinterestshaveincreased,sohasprivatefinancingofawiderangeofbasicportassetsandoperations.However,climateresilienceissuescreatetheneedforexpensive,long-termprojectsthataredifficulttofinanceinprivatemarketsduetotheuncertainpayback,exceedingthestandard20–to-30–yearinfrastructurehorizon.Climateadaptationandresilience(CAR)guidelineshavebeendeveloped,includingnatural(mangroves,reefs)andstructural(seawalls,dock-yardelevations)solutions(CBI2020a).Becausethenationaleconomicbenefitsofsuchprojectsarecompelling,multilateralbanksandinstitutionswithclimatefinancemandatesareincreasinglycalledupontodeliverlong-term,blendedfinancesolutions.Therearefourtypesofportinvestments:basicinfrastructure,operationalinfrastruc-ture,portsuperstructure,andequipment.Eachtypeappealstoadifferentmixofpublic(regionalandnational)andprivate(portoperatorsandcapitalmarkets)investors.Eachinvestmentalsopresentsdifferentsustainabilitychallengesandopportunities,whichweshallconsiderinthenextsection.Turnthetide:Howtofinanceasustainableoceanrecovery57PortsKeyenvironmentalandsocialimpactsanddependenciesPortsandportoperationsimpacttheland,airandwater.Humanhealth,andlandandmarineecosystemssufferfromport-basedpollutionandinfrastructuredevelopment.Financiersmustbeawareofwhetherornottheseissuesareaddressedbylocalornationalregulations.Airpollutionexposespeopletoserioushealthimpacts.Portemissionscomefromawiderangeofsources—directlyorindirectlyrelatedtoportoperations—including:fuel-poweredcargohandlingequipment,ships,harbourcraft,trucks,raillocomotives,portadministrationvehicles,andpowerplantsprovidingenergyforportoperations.Emissionsincludegreenhousegases(GHGs),notablycarbondioxide(CO2),oxidesofnitrogen(NOx),oxidesofsulphur(SOx),methane(CH4)andparticulatematter(PM).PMcantravellongdistancesandcontributestoanincreasingprevalenceofrespira-toryinfectionssuchasbronchitisandpneumoniaaswellaschroniclungandheartdisease,cancerandprematuredeaths(WHO2006).Portsaremajorplayersintheenergycomplex,withalltheassociatedrisksandpollutionfromtransporting,storingandburningfossilfuels.Thereisgreatincentive,therefore,toincreasethepercentageofrenewableenergyusedbothdockside(e.g.forcoldironing)andinportyards(Safet-y4Sea2019).Marinepollutionfromportsincludespoorland-basedwastemanagement,opera-tionaldischargesfromshipsinharbour,aswellasurbanandindustrialtoxicchemicalrun-off.Thisdirectlydamagesmarineecosystemslocallyand,duetotidesandcurrents,alsoimpactsregionalseas.Harmfrompollutiontofishingandtourismbusinessescompoundsthecoststolocaleconomies.Inadequatewatertreatmentsystems,espe-ciallyindevelopingnations,canfurthercompoundhealthimpacts.Climateimpacts,withmorefrequentstormsandsealevelrise,mayoverwhelmwatertreatmentandwastemanagementsystems,especiallyinportareas.Aspartoftheregulatoryattemptstomanagethenegativeimpactsfrompollution,MARPOLdefinesEmissionControlAreas(ECAs)thatprotectspecialareaswithtighterpollutionstandards,howevertheseareasarelimitedatpresent.1717TheemissioncontrolareasestablishedunderMARPOLAnnexVIforSOxare:theBalticSeaarea;theNorthSeaarea;theNorthAmericanarea(coveringdesignatedcoastalareasofftheUnitedStatesandCanada);andtheUnitedStatesCaribbeanSeaarea(aroundPuertoRicoandtheUnitedStatesVirginIslands).Turnthetide:Howtofinanceasustainableoceanrecovery58PortsClimateresilienceandadaptationissuesplaceportsonthefrontlineofrisk,withanestimatedUSD49bnaloneneededtoprotectAsia’s53largestportsfromrisingseasandstorms(McCarron2018).Port-sideemissionsarepartofaglobalproblem.Notably,thePMarisingfromincompletecombustionoffossilfuelprimarilyconsistsofblackcarbon(BC),aparticleclimatechangeagentthatissecondonlytoCO2inimpactonclimatechange(surpassingthatofCH4,CFCs,N2O,ortroposphericozone)(WHO2006).Socialimpactsbroadlyfallintotwocategories,namelycommunityhealth(asdiscussedabove)andlabour:safety,conditionsandgenderinclusion.TheIMOhassetstandardsforPortStateControl,withinputfromtheInternationalLabourOrganization(ILO),coveringsafetyissues:fromhandlingofhazardousmaterialstosafelyoperatingheavymachinery(ILO2018).RegardingtheCovid-19response,theWorldPortsSustainabil-ityProgramhasaninformationportalthatunderscorestheimportantfront-lineroleofportsinthepandemic.Severalmaritimeinitiativesareadvancinggenderandinclusive-ness,suchasWomen’sInternationalShipping&TradingAssociation(WISTA)andIMO’sWomeninMaritime(WISTA2020).ThesepressuresandtheirimpactsonenvironmentandsocietyarelistedinTable5below.RelationshiptoothersectorsoftheblueeconomyWithintheblueeconomy,portsserveallothersectors.Afewexamplesinclude:◾Shipping,ofcourse,dependsentirelyonportservicestoloadandunloadcargoandpassengers.Theratingofportsbyshipownersisasignificantyardstickbywhichportsarecomparedandselected.Maritimedigitaltechnologyisahigh-growthsegmentofitsown,enhancingtheabilityofportstomanageallaspectsofshippingtraffic,operationsandevenpollutioncontrols.◾Fishingvesselsdock,depart,returnandunloadtheircatchatports.Eachoneoftheseoperations,especiallyverificationofthecatch,requiresexpertassistanceandmonitoringbyportauthoritiesorfisheriesmanagers.Coldstoragefacilitiesarelocatedatornearports.Whilefloatingseafoodprocessingreplacessomeofthesefunctions,thereturntoportoffishingandprocessingvesselsprovidesthefinalopportunitytocheckforsustainabilityissueslikeIUUcatch.◾Renewableenergyfacilitiesareoftentestedandoperatedatornearports.Inte-gratingrenewablesintotheportenergymixisoneofthemajorpartsofthesustainabilitytransition.Thefirstexposureashipcaptainmayhavetorenew-ablesispluggingintocleanonshorepowerratherthanrunningdieselfuel.Muchofthiscleanonshorepowerissolarbut,astheeconomicsimproveformarinerenewables,portsarebecomingearlyadopters.Turnthetide:Howtofinanceasustainableoceanrecovery59PortsPressuresImpactsDredgingandsitingofportfacilitiesSitingandexpandingportsandoffshoreplatformswithoutfollowingenvironmentalcodesandprotectionsmaydamagethemarineenviron-ment,suchashabitats,fisheries,corals,mangrovesandcoastlines.Portdredgingdisturbstheseabed,whichmaycausesubstantialharmtohabitats,fisheriesandnaturalcoastalprotections.Animalwelfareinportareasmaybereducedbydredgingandsitingthatcauseshabitatdestruction.AirpollutionGHGemissionsfromportsandshipscontributetosealevelrise,coastalerosionandstorms,leadingtoreducedclimateresilience.Particulatemattercantravellongdistancesandcontributestoanincreasingprevalenceofrespiratoryinfectionssuchasbronchitisandpneumoniaaswellaschroniclungandheartdisease,cancerandprematuredeaths.Waterandnoisepollu-tionAnimalwelfareinportareasmaybereducedbypollution,includingnoise,toxicdischargesandrunoff.Pollutantsfromvesselsandportoperationsmayaffectmarinebiochemistryandecosystembalance.LabourpoliciesandconditionsUnfairportandshipyardlabourpracticesmaymanifestasallocatinghigh-risktaskstoindigenousworkersandotherdisadvantagedgroups.Workersmaynotbesufficientlyprotectedorinsuredagainsthigh-riskactivitiesinportsandshipyards.Portsandshipyardsmayunfairlyexcludeworkers,orallocateriskytasksforsocial,genderorethnicreasons.EconomicvolatilityGlobaltradevolatilitymaydisruptaport'sworkforce,withnosafetynetfordependentcommunities.AccidentsDamagesfromstormsandaccidentsmayresultinportlayoffsanddisruptionstolocalcommunities.Table5:PressuresandimpactsofportsTurnthetide:Howtofinanceasustainableoceanrecovery60PortsOutliningmaterialityIncommonwithallinfrastructuresectors,portfinanceandinsurancehavelongtime-linesandinvolvehigh-valueassets.Therefore,riskmanagementplaysalargeroleinmakingdecisions.Portsareregulatedtoensureefficientandcompetitivefunctioning.Duetoportsectorreforms,manyportshaveevolvedintoalandlordportauthority,withfacilitiesleasedtoprivateoperators(PPPLRC2016).Financiers,therefore,mustrequireaccountabilityfromportoperatorsaswellasownerstoensureregulatorycomplianceand,especially,socialandenvironmentalbestpractices.Broadlyspeakingtherearetwotypesofportregulations:◾Economic:Thesearesetlocallyandnationally,governingthesettingoftariffs,reve-nues,orprofits;controllingmarketentryorexit;establishingtheowner-agencyrela-tionshipwithportoperators;andmaintainingfair,competitivepractices.◾Non-Economic:Thesearesetlocallyandglobally,governingenvironmental(airandwaterpollution),labour(healthandsafety)andphysical(collisions,fires,storms)stan-dards.BecauseoftheroleofIMOandindustrybodies,itcannotbeassumedthatcompliancewithlocalregulationsalsocoversglobalregulations.Porttransparencyandaccountabilityis,therefore,essential.Thefortunesofportsarecloselytiedtoglobaltradeandcommodityprices.Insurance,diversifiedcapitalsourcesandbusinessdiversificationplayvitalrolesinreducingtheserisks.Astheportsectorisexceedinglycompetitive,thosewhocanminimisemarketrisksholdadistinctadvantageandareinabetterpositiontosupporttheworkersandcommunitiesthatdependonthem.Reputationalriskmayalsobereducedbypreventativeactions.TheIMOpromulgateditsFiveStepFormalSafetyAssessment(FSA)in1996afteraUSportwasfinedarecordUSD4mindamagesforanoilspillfromanapproachingtankerresultingfrompiloterror(PortStrategy2015).Laxenvironmentalandlaboursafeguardscauseaccidentsthatmayseriouslydamageaport’sreputationandcompetitiveness.Inaddition,aport’ssociallicensedependsonthesesafeguardsbeingenforcedwiththebestinterestsofthecommunityinmind.Portriskmanagementisnowaspecialtyfunctionwithsystematicprocessesandsoftware.Physicalrisksstemfromtwobroadcauses:◾Humanerror:Collisionsinharbourordocksidecausedbypiloterror,andland-basedmachinerydamagefromimproperoperation.◾Naturaldisaster:Extremeweathereventsdamagingportassetsandcoastalecosys-temsintheportarea.Turnthetide:Howtofinanceasustainableoceanrecovery61PortsThesecanbemitigatedwithplanningandsafetyprotocolsalongsideinvestmentinnewtechnologies.Modernsystemsandsoftwareanticipateoperationalrisks.Forexample,theoper-ationalriskmoduleofABPmer’sPortAssessmentToolkit(MarNIS)coversnauticalsafety,environmentalprotection,crisismanagementandportefficiency(PortRiskManagement,2020).Table6outlinestherelationshipbetweenthekeydriversofportimpacts,thepressurestheseplaceonsocietyandtheenvironment,andtheirmostmaterialrisks.“WecanonlyfulfillthepotentialoftheBlueEconomyifweensuretheharmonyofitsecosystems.Asprovidersofventurecapital,theseGuidelinesareoursustainabilityblueprintsforinvestingintheeconomicsolutionsemergingfromtheocean.”StephanMorais,ManagingGeneralPartner,IndicoCapitalPartnersTurnthetide:Howtofinanceasustainableoceanrecovery62PortsPressuresImpactsRisksDredgingandsitingofportfacilitiesRegulatoryRegulatoryandreputationalrisksfromenvironmen-talcodeviolationsduringdredging,portsitingandshipyardoperations.ExtendedProducerResponsibility(EPR)casesinlogisticsmaydrivenewregulations(Pouikli2020).ReputationalRegulatoryReputationalriskfromcitizen/NGOactionconcerningecosystemdamagemayleadtolossofsociallicensetooperate.ReputationalRegulatoryriskandliabilityfromcostofdamagedecosystemservicesanduseconflictwithotherindus-tries(e.g.fishing,tourism).AirpollutionRegulatoryRegulatoryrisk(fines)forviolationsoflocalpollutionregulationsandIMOsulphuroxides(SOx)emissionregulations(MARPOLAnnexVI).PhysicalPhysicalrisktoportsfromstormscausedbyclimatechange.MarketMarketriskfromcustomerswhoavoidportswithpoorenvironmentalrecords.RegulatoryHighrisktoportstaffandadjacentcommunityofhealthproblemsandmedicalliabilityforSOx,nitrogenoxides(NOx)andcarbondioxide(CO2)emissions.WaterandnoisepollutionRegulatoryRiskofnewregulatoryactionconnectingportswithplasticpollution,oilspillsandindustrialrun-off.ReputationalReputationalriskfromdisturbancesufferedbycustomersandcommunity.EconomicvolatilityRegulatoryLossofjobsandsociallicensetooperatemayoccurfromeconomicvolatilityandbusinesscontractions.MarketAccidentsReputationalMarketriskforharbouraccidentscausingvessel,crewandcoastaldamage.RegulatoryMarketLabourpoliciesandconditionsPhysicalPortandshipyardoperationsinvolvephysicalandhealthriskstoworkers.Table6:OverviewofportsrisksandmaterialityTurnthetide:Howtofinanceasustainableoceanrecovery63PortsCriteriaforsustainablefinancingBasedontheimpactsandtheirmaterialityoutlinedabove,theattachedCriteriaAnnexforthesustainablefinancingoftheportssectorisproposed.Thislistofcriteriaandtheirassociatedindicatorsofferrecommendationsforfinancialinstitutions.Theserecom-mendationsareto:avoidtheworstscenarios,challengeareasforimprovement,orseekoutbestpractice.RefertotheCriteriaAnnexformoredetailedinformationFromrisktoopportunityPortsandrelatedservicesarepartofthewaveofinnovationthatissweepingthemari-timeindustry.Severalareasofinnovationarespeedingthetransitiontomoresustain-ableportoperations,allofwhichrepresentstrongbusinessopportunitiesforfinanciers:◾Digitalapplicationsimprovecomplexporttaskssuchastrafficmanagement,allocat-ingandmeasuringenergyusage,pilotingwithinharbours,docking,cargoverification,environmentalcompliance,storageandinlandtransport.Productdevelopmentareasinclude:artificialintelligence,autonomousvessels,blockchain,cybersecurity,digital-isationandsmartshipping(LloydsMaritimeAcademy2020).Allofferbenefitsfromresourceefficiencytolaboursavingsandriskreduction.◾Maritimeacceleratorsleverageportfacilitiestosupportthegrowthofstart-ups.Majorandregionalportsworldwideareseizingthisopportunity.Portsmayoffertest-ingfacilities,heavyequipment,businesscontacts,capitalandproductioncapabilitiestomaritimeinnovators(PortTechnology2020).Inadditiontosustainabilitygains,acceleratorsdrivejobcreationandeconomicgrowth.◾Cleanonshorepower(orcold-ironing)projectsfromsolarenergyandwindturbinesmaybespurredbylocalregulationstoprotectcommunitiesandloweroperatingcostsforports(Safety4Seas2019).Thisisastrongareaofinnovationfortechnologyanddelivery.Turnthetide:Howtofinanceasustainableoceanrecovery64Ports◾Productionandstorageofalternativefuels(hydrogen,ammonia,methanol,biofuels)arecapital-intensivebutessentialpartsoftheIMOemissions-reductiontrajectory.Infrastructureforcleanfuelsupplychains,byoneestimate,willtake85%ofthetotalinvestmentneededtosupportshippingdecarbonisation(UMAS2020a).◾Cleanauxiliarypowerforvessels,fromFlettnerrotorstowaste-heatcapturesystems,arebeingtestedandinstalledonvesselsinportsandshipyards.◾WastemanagementisincreasinglyimportantasportsandshipyardstakeonthisservicingrolebehindverificationofcompliancewithIMO-MARPOLregulations.Safedisposalofsolidwaste,ballastwater,fuelresidueandchemicalsarefunctionsalsomarkedbyinnovation.Recyclinginnovationsoffertheabilitytomonetisesomeofthiswasteandcreatenewrevenuestreamsforports.◾Portexpansionisdrivenbylargervesselsthatrequirewiderchannels,largerdocksandstoragecapacity.Portdredgingandphysicalplantexpansion,alongwithupgradestopowersourcesanddigitalequipment,areallpartoftheexpansiontrend.Respectingenvironmentalcodesineachofthesefunctions,bydefinition,createsopportunitiesforinnovationonthepathtogreenandsustainableports.Withthiscomestheneedfortrainingofskilledworkersandoverallcapacitybuilding.“Inthecoming20yearswewillseetheworld’snextindustrialrevolutionthroughthedevelopmentofemissionfreetransportationforoceanshipping.Inaddition,thedevelopmentofthecirculareconomywillchangethenatureofshippingwaste.Giventhesesignificantchanges,wewelcomethecollaborationbetweentheinvestorswhowillfundtheseadvancesforabettertomorrow,achievedbythisUNEPinitiativefortheSustainableBlueEconomy.”ClydeHutchinson,Partner,JourneyPartnersGlobalsustainabilityinitiativesareneeded,andquiteafewarealreadyunderway:◾UNEP’sGlobalCleanPortsInitiative,aimedatreducingemissionsatselectedports,helpstodevelopbestpracticeandreducemaritimePM/BCemissions(UNEP2020).◾WorldPortSustainabilityProgram(WPSP)wasestablishedin2017toencouragetheindustrytotakestepstoalignwiththeSDGs(WPSP2020).◾GoodPracticesforCruiseandFerryPorts,promotedbytheEuropeanSustainablePortsOrganisation(ESPO),mayinfluencepracticesworldwide(ESPO2016a).◾TheClimateAdaptationToolforPorts,developedbyanindustrybody,helpsportsstrengthenclimateresilienceinexistingfacilities(PortTechnology2020a).Financiersandinsurersareencouragedtoseekoutopportunitiestopartnerwithrele-vantorganisationstohelpreducenegativesocialandenvironmentalimpactsfromports.Investinginportsisanopportunitytodecreaserisksandincreasereturnsbysupport-ingimportantinfrastructuresintheirjourneytowardssustainability.Greenlogisticsisaprominentthemeandfinancialopportunitytoday,especiallyforthemaritimeandportsectorsthatdominateglobaltrade.Turnthetide:Howtofinanceasustainableoceanrecovery65PortsCasestudiesThesecasestudiesoffinancialinitiativesdemonstratehowtargetedfinancecandriveprogressinsustainableportsandserviceswhileaddressingrisksandimpacts.ThamesGreenScheme–PortofLondonAuthorityTheThamesGreenSchemeisaPortofLondonAuthority(PLA)projectthathasbeendevelopedinpartnershipwithvesseloperators(GreenPort2020a).Itsfocusisperfor-mancerelatedtoairquality,carbonemissions,energyuse,waterquality,litterandwaste.Applicantstotheschemewillberankedinoneoffivetiers.Thisrankingsystemwillrecogniseearlyadoptersofnewgreentechnologiesandallowcustomerstomakemoreinformedchoicesinconnectionwithclimatechangeandenvironmentalimpacts(ibid).InadditiontothisschemethePLAisalsocommittedtocuttingcarbonemissionsbymorethan60%by2025andtoachieving‘netzero’by2040.(ibid).VictoriaChan,AirQualityAdvisortothePLAsaid,“WehaveintroducedthisnewschemetohelptheinlandwaterwayscommunitydotheirbitinachievingnationalNetZerogoals,improv-ingairqualityandreducingdamagingcarbonemissions”.Wealsonotethattheprojectincludesfinancingearly-stagetechnologies,whichexpandstheopportunitysetforportfinancebeyondthetraditionalemphasisonproveninfrastructureassets.TakeawayPortshavehighcommunityvisibilityandcontrolaccessforshipsandcargomovinginland.Financiers,forbothreputationalandstrategicreasons,shouldencouragetheroleofportsasgatewaysforsustainablemaritimeactivitybyengagingwithandsupportinginitiativeslikethisone.BestGreenSeaportAward–HAROPAAsiaCargoNewsmagazineawardedHAROPA(aFrenchportcomplex),the‘BestGreenSeaport’onbehalfofthemagazine’s15,000readers.TheseincludeAsianimporters/exporters,logisticians,freightforwardersandshippingcompanies(GreenPort2020b).HAROPAisamemberoftheGettingtoZeroCoalition(GlobalMaritimeForum2020a),anorganisationthatsupportsthedecarbonisationofthemaritimeindustry,along-sidecompaniesfromshipping,energy,infrastructureandfinance.AsLaurentFoloppe,HAROPA’scommercialandmarketingdirector,notes,“Thistrophyillustratesrecogni-tionofourenvironmentalpolicy.ItprovesthatwecanbothbethepremierFrenchportcomplexandensuretherespectfuldevelopmentofourregionsandecosystems”(ibid).TakeawayEconomicandenvironmentalinterestscanbesuccessfullyalignedandbalancedtoallowportstoprosper.Additionally,joiningtheGettingtoZeroCoalitionandotherindustryinitiativeswillsupportthetransitiontogreenports.Turnthetide:Howtofinanceasustainableoceanrecovery66PortsSingapore’sMaritimeAcceleratorsNetherlands-basedPortXL,theworld’soldestoperatorofmaritimeaccelerators,wastappedbySingaporetorunitsfirstmaritimeaccelerator.Localinvestmentgroup,AugustOne,partneredwithPortXLtocontinuesupportingandfundingmaritimeinno-vatorsinSingapore.Thefocusisondigitaltechnologiesandsustainabilitysolutionsofallkinds,makingSingaporeasignificantplayerontheworldstageofportandshippinginnovation(PortXL2021).AnotherSingaporegreenportinitiativeisledbyshipmanagementcompanyEasternPacificShipping(EPS)andentrepreneurnetworkTechstars.Theduoannouncedajoint-ventureprojecttolaunchaglobalstart-upaccelerator,the“EPSMaritimeTechAcceleratorPoweredbyTechstars”.Digitaltechnologyistransformingthemaritimespace,makingitpossibletoadvanceandmonitorsustainabilitygoalsineverythingfromportoperationstofuelefficiencyandsustainablefishing.Ashortlistofstart-upcompanieswaschosenforanintensivethree-monthprogrammeofresearchanddevelopment,mentorship,andcollaboration.Thecompaniesthenpitchedtheirbusi-nesstoanaudienceofventurecapitalists,corporateinnovationleadersandindustryexperts(PortTechnology2019).Lastly,theMaritimeClusterFund(MCF),launchedbytheMaritimeandPortAuthorityofSingapore(MPA),ispartofSingapore’scommitmenttoaninnovative,greenportcomplex.TherearethreekeycomponentsunderMCF:◾TheMCF-ManpowerDevelopmentco-fundsmaritimecompaniesinthedevelopmentofmanpower,traininginitiativesandcapabilities.◾TheMCF-BusinessDevelopmentsupportseligibleexpensesincurredinthesettingupofnewmaritimeoperationsorexpansionintonewlinesofmaritimebusinessesinSingapore,andinternationalisationeffortsbymaritimecompanies.◾TheMCF-Productivitysupportsinitiativesbythemaritimeindustrythatwillleadtoproductivitygains.(MaritimeandPortAuthorityofSingapore2020)TakeawayPortsarenaturalhomesformaritimeaccelerators,supportinggreentechnologiesandemploymentopportunitiesfornationsandcommunities.Financiershavetheopportu-nitytoparticipateinthisrelativelylow-riskentrypointforsustainableportandcommu-nitygrowth.Turnthetide:Howtofinanceasustainableoceanrecovery67MaritimetransportationMaritimetransportationTurnthetide:Howtofinanceasustainableoceanrecovery68MaritimetransportationSectorandfinancialoverviewMaritimetransportationcomprisesthevesselsandinfrastructurethatdriveglobaltrade,thefishingindustry,offshoreandnavaloperations,passengertransportandtourismontheworld’sseas.Financingthissectoranditstransitiontosustainabilityis,therefore,animportantandcomplextask.Thescopeofthisguidanceisthefinanceandinsuranceofallvessels(includingoffshoreplatformsandservicingvessels)throughtheircompletelifecycle,fromconstructiontorecycling18.Themaritimetransportationofgoods,fuelandservices—alsoreferredtoasshipping—carries80%ofglobaltradebyvolume,70%byrevenue,andisthemostefficientmeansofmovinggoodsonaCO2/tonne/kmofcargomovedbasis(ClimateBondsInitiative2020).Thereareover50,000merchantshipstradinginternationally,transportingeverykindofcargo.Theworldfleetisregisteredinmorethan150nationsandmannedbymorethanamillionseafarers(InternationalChamberofShipping2020a).Beyondthecontainer,bulkandtankersegmentsofshipping,maritimetransportationalsoincludesvesselsforfishing,passengertransport,navalandservicefunctions.Table7presentsasummaryofthekeysegmentsofthisbroadindustrywithcorrespondingownershipandfinanciertypes.19VesseltypeOwnershipFinanciertypesContainershipsPrivate/PublicBanksandnon-banklenders,privateequityfunds,lessors,debtmarkets,tradefinanciers,insurance:vessel/cargoBulkcarriersPrivateBanksandnon-banklenders,privateequityfunds,lessors,debtmarkets,tradefinanciers,insurance:vessel/cargoOil/GastankersPrivateBanksandnon-banklenders,privateequityfunds,lessors,debtmarkets,tradefinanciers,insurance:vessel/cargoFishingvesselsPrivateBanksandnon-banklenders,tradingconglomerates,commodityfinanciersPassenger(cruise,ferries,recreational)Private/PublicBanksandnon-banklenders,lessors,debtmarketsOffshoreplatformsPrivateBanksandnon-banklenders,lessors,debtmarkets,infra-structurefundsNavalvesselsPublicPublicfinance,debtmarketsServicevesselsPrivate/PublicBanksandnon-banklenders,lessors,debtmarketsTable7:Maritimetransportationsegments:vesseltypes,ownership,financiers18MoredetailonissuespertainingtofishingvesselsandcruiseshipsmaybefoundintheSeafoodchapterandMarineandCoastalTourismchapterofthisguidance,respectively.Portsandrelatedservicesarealsotreatedinaseparateguidancechapter.19ThesegmentationinTable7combinesthesegmentalapproachesusedbyLloydsRegisterandIMO.Turnthetide:Howtofinanceasustainableoceanrecovery69MaritimetransportationGrowthforthelargestsegment—containershipping—isprojectedtocontinueatacompoundrateof8.3%to2025,reachingUSD11bnannualrevenuesglobally(Statista2017).However,thisisbalancedbythreetrends:industryconsolidation,alliancesandverticalintegration.Consolidationisreflectedinthefactthat82%oftheindustrywasoperatedbyonly10containershipownersin2018,upfrom50%in2003(UNCTAD2019).Furtherconsolidationappearstobelikely,asaresultofcommoditytradeflows,Covid-19disruptionandenvironmentalregulations.Additionally,vesseloversupplycharacterizesthecontainer,bulker,tankerandfishingsegments,speedingthetrendtowardsoligopolies(UNCTAD2018).Alliancesbetweenshipowners,ofwhichtherearecurrentlythreemajorexamples,improvelogisticeffi-ciencieswithoutchangingcorporateownership(Mendoza2020).Verticalintegration,similarly,doesnotchangethenumberofcontainershipplayersbutenablesthemtoacquireadditionalpartsoftheshippingvaluechain,fromterminalstodataservices(LloydsList2020a).Geographically,maritimetransportationisdiversified.Europeishometoalmost40%oftheworld’sfleet(EuropeanCommunityShipowners’Associations2020),partlythankstohostingtheheadquartersoffiveofthetoptencontainershippingcompanies(MoverDB2016).Asiaishometothemajorityofshippingandshipyardcompanies,ledbyChina,JapanandKorea(NortonRoseFulbright2018).Ownershipmaybedefinedbycompanyheadquartersorflagofthevessel.FlagsofConvenience(FoC)areusedbyalmost50%oftheglobalfleet(SeaNews2017).FoCsareahotlydebatedanduniquefeatureofthemaritimetransportationindustry.RegisteringvesselsinflagstatessuchasLiberia,Panama,andtheMarshallIslandsreducesadmin-istrativecostsandallowsshipownerstocircumventstringentdomesticregulationsthatprotecttheenvironmentandemployees(ibid).Assuch,theycontributesignificantlytothedifficultyinregulatingthisglobalindustry.“AsthefirstmarineinsurancecompanytobeasignatoryoftheSustainableBlueEconomyFinancePrinciples,wearedelightedtoparticipateinthedevelopmentofthefirstguidetoidentifyandmitigateESGrisksintheblueeconomy.WecallonmarineunderwriterstoembracetheSustainableBlueEconomyFinancePrinciplesandaddressESGrisksinordertobenefitindustryandsociety.”IliasTsakiris,CEO,AmericanHellenicHullInsuranceForoffshoreplatforms,theglobaldecommissioningmarketsizeisgrowingatalmost5%peryear,andisprojectedtoreachUSD8.9bnby2027(Markets&Markets2019).Completeremovalisthemainactivityinthesector;however,greentransitionoptionsmayincludealternativefuelstations,marineenergyandoffshorewindproductionandconversiontomarinehabitats.Convertingdetoxedplatformstoreefsmaybecontrover-sialfromacostperspective—howeverithasstrongenvironmentalmeritatatimewhennaturalreefsaredisappearingduetoclimatechange(BSEE2018).Turnthetide:Howtofinanceasustainableoceanrecovery70MaritimetransportationVessellifecyclesspandesigntoconstructionanddestructiontorecycling.Eachofthesestageshasimpactsontheenvironmentandonworkerhealthandsafety,withpoten-tialformanyissuestobeavertedinthedesignstage.Circulareconomyprinciplesareimprovingvesseldesign,asseenbyDenmark’sCircularShippingInitiative(DanishMari-timeAuthority2020).Fortheshipbuildingstage,Chinacontrolsmorethan50%ofthemarketandrecentlyisseeingmoreordersforzero-emissionvessels(BureauVeritas2020).Shipconstructionmustincludeenergyefficienciesanddecarbonisationtechnologiesbecausevesselsbuilttodaymustcompetewithvesselsbuiltin10–20years’time.Futurestandardsmustalsobeanticipated,evenastechnologiesarestillbeingtestedandcommercialised.FinancingthesectorBankloanshavetraditionallybeenthedominantformofshippingfinance(MaritimeLondon2020).Capitalsourceshavediversifiedsince2008,whensomebanksbegantoexittheshippingsector(HellenicShippingNews2019).Sincethen,avarietyofothervehicleshavefilledthevoid:privateequityfunds,debtprivateplacements,sale-lease-backsandbondsissuedintheNorwegiancapitalmarkets(MarineMoney2020a).Morethan80%oftheworld’sshippingcompaniesareprivatelyownedandprivateequityfundsownupto70%ofthelistedshippingcompanies(UNCTAD2018).Therefore,engage-mentopportunitiesviathepublicequitymarketsarelimited.Maritimetransportationisacapital-intensiveindustry.Shipsaretechnicallysophisti-cated,high-valueassets.Financingshipping—fromvesselstocargo—requires,inaggre-gate,morethanUSD200bnperyear(ibid).KeyenvironmentalandsocialimpactsanddependenciesMaritimetransportationhassubstantialimpactsonthemarineenvironment,airqual-ity,workerhealth,coastalcommunitiesandresilience.Keydriversofimpactsmaybeconsideredintwobroadcategories:Vesseloperation(includingnavigation,powering,andwastemanagement)andvessellifecycle(includingconstruction,destruction,andrecycling).Bothcategoriesplayaroleinmostenvironmentalandsocialimpacts.Theenvironmentalimpactsofshippingrangefromairandwaterpollutiontoharmingmarinelifeandclimatechange.Theseimpactsareespeciallyassociatedwiththeoper-ationaldrivers.Environmentalimpactsbymaritimetransportationoperationsincludewarmingandacidificationfromemissions,habitatlossfromvesselroutesanddredging,biodiversitylossfromemissions,oilspills,andcollisionswithmarinelife.Acombinationofregulation,renewableenergyadvancesandcustomerdemandhascreatedanoppor-tunitytomakeshippingmoreenvironmentallysustainable.Turnthetide:Howtofinanceasustainableoceanrecovery71MaritimetransportationDecarbonisationisamajorchallengeformaritimetransportation.Withinthewidersector,shippingisresponsibleforapproximately3%ofglobalgreenhousegas(GHG)emissions,andshippingwouldbethesixthlargestGHGemitterifitwererankedasacountry(Oceana2008).ShippingemissionsarenotdirectlyincludedinNationallyDeter-minedContributions(NDCs)undertheParisClimateAccords(UNFCCC2016).TheIMO,abranchoftheUNthatregulatestheinternationalshippingindustryandallsea-goingvessels,hassetatrajectoryfor50%decarbonisationoftheglobalfleetby2050,basedona2008emissionsbaseline.Tomeetthisgoal,anestimatedUSD6tnofinvestmentisneededoverthenext50years,with85%ofthisfigureprojectedasnecessarytodevelopanalternativefuelsupplyinfrastructure(UMAS2020;GlobalMaritimeForum2020).RegulationsdevelopedbytheIMO(notablyMARPOL,theInternationalConventionforthePreventionofPollutionfromShips)aregloballyenforceable.Whilethesemeasuresregulateactivityininternationalwaters,it’stheresponsibilityofflagstatestoimple-mentandenforcethem.SuccessesliketheBallastWaterManagementConventionandMARPOLAnnexVI(Regulation16,SulphurAirEmissions)areencouraging.However,progresstowarddecarbonisationhasonlyjustbegun,withnoenforceablescalingyettotheIMO’s2050trajectory.“AtSeaAhead,weseeanacuteneedandopportunityfornew,scalabletechnologiesandventuresthatimproveoceansustainability.Thisguidancewillhelpinvestorsidentifyimpactfulinnovationsandmakesmartfinancialdecisionsthathaveanoutsized,positiveinfluenceonarapidlychangingocean.”MarkHuang,ManagingDirector,SeaAheadThefinalstagesofshiplifecycles,shipdestructionandrecycling(orscrapping),areparticularlyassociatedwithhealthimpactsonworkersandwastetothemarineenvi-ronment.TheHongKongConventionof200920setsoutstandardsandrecommendsbestpracticesforshiprecycling(IMO2009).Theaveragenumberoflargeshipsbeingscrappedeachyearisabout500–700but,takingintoaccountvesselsofallsizes,thisnumbermaybeashighas3,000(ILO2015;EuropeanCommission2019).Ninetypercentofship-breakinggloballyiscarriedoutinBangladesh,China,India,PakistanandTurkey(IMO2009).AdditionalsafetyandenvironmentalrequirementswereaddedforEU-flaggedshipsin2013bytheEuropeanCommission(EC-Environment2013).20TheHongKongConventionwasadoptedin2009buthasnotyetenteredintoforceatthepointofwriting.Turnthetide:Howtofinanceasustainableoceanrecovery72MaritimetransportationSocialimpactsfromoperationalandlifecycledriversincludesafety,labourpractices,gender,inclusivenessandtheimpactofCovid-19onseafarers.TheNeptuneDeclara-tion,signedbymorethan400organizations,outlinesthemainactionsthatneedtobetakentoresolvethepandemiccrewchangecrisis(GlobalMaritimeForum2020b).TheInternationalLabourOrganization(ILO)andtheInternationalMaritimeOrganization(IMO)regulatelabourconditionsinmaritimetransportation(ILO2013).Maritimeleadersidentifymajorsocialchallenges:shortageofqualifiedseafarersandland-basedtalent,increasedautomationoftasks,employeeretentionandincreaseddiversityofthework-force(IMO2020c).TheIMOandseveralnationalmaritimeorganisationshavemadetheadvancementofwomenapriority,referencingSDG5(GenderEquality)andSDG8(DecentWork).Challengesremainforlabourriskinthedestruction/recyclingstage,forwhichshipownersandtheirfinanciersremainresponsible.RelationshiptoothersectorsoftheblueeconomyInadditiontotheimpactsoutlinedinTable8,marinetransportoperationsmayhavenegativeeffectsonotherblueeconomysectors,including:◾Fishing:Groundsdisruptedbyshippingroutes,emissions,noise,invasivespecies,operationaldischarges,vesselgroundings.◾Tourism:Marineecosystemsandcoastlinesmaybedamagedbyvesselemis-sionstowater,solid/plasticwaste,noise/airpollution,andlocaleconomic/socialdisruptionfromcruiseships.◾Energy:Vesselroutesmayimpede,orbedisruptedby,sitingofoffshoreplat-formsandwindinstallations.Turnthetide:Howtofinanceasustainableoceanrecovery73MaritimetransportationPressuresImpactsWaterpollutionVesselsandshippingoperationsdamagemarinelifewith:fuelemis-sions,oilspillsfromtankersandplatforms,hullresidue,toxins,anddischargeofwasteandballastwater(invasivespecies).Toxicwasteandemissionsfromshipsburningfossilfuels(includingLNG)changethechemicalcompositionoftheseaandthehealthofallmarinelife.ShippingpollutantsthataltermarinebiochemistryincludeCO2,SOx,NOx,untreatedballastwaterandfuelresidue.AirpollutionGHGemissionsfromvesselscontributetoglobalwarmingandacidifi-cation,resultinginstormsurges,sealevelrise,andcoastlineerosion.Airpollutionfromshipsdamagesthehealthofpeopleincoastalcommunitieswhereshipssailanddock.TrafficandaccidentsCoastalecosystemservicesandresiliencemaybedisruptedbyvesselroutesandaccidentsthatdamagereefsandmangroves.Animalwelfaremaybereducedbycollisionswithvesselsandnoisepollution.Vesselsdamagedinstorms,groundingsorcollisionsresultinlayoffs.Conflictovervesselroutesmayharmlivelihoodsinothermaritimeindustriesandcommunities.LabourpoliciesandconditionsUnfairshippinglabourpracticesmaymanifestbyallocatinghigh-risktasksorunpaidovertimetoindigenousworkersandotherdisadvan-tagedgroups.Volatileshippingandtradecyclesmaydisruptlivelihoodsincoastalcommunities.Covid-19highlightedthevulnerabilityofseafarerswhowereinfectedorunabletoreturnhome(ILO2020a;IMO2020b).Workersmaynotbesufficientlyprotectedorinsuredagainstdiseaseorinjuryfromhigh-riskactivities.Airpollutionfromshipscontributestoanincreaseinrespiratoryinfectionssuchasbronchitisandpneumo-nia;aswellaschroniclungandheartdisease,cancerandprematuredeath(WHO2006).Bothemployeesandcoastalcommunitiessuffertheseimpacts.Womenorethnicgroupsmaybecompensatedlessforthesametasksthanmorefavouredgroups.FlagsofConvenience(FoCs)usedbymorethanhalfoftheglobalfleetmaycompromiseaccountabilityandbestpractices(SeaNews2017).Table8:PressureandimpactsofmaritimetransportationTurnthetide:Howtofinanceasustainableoceanrecovery74MaritimetransportationOutliningmaterialityTheimpactsnotedabovecreateanumberofmaterialriskstofinancialinstitutions,nota-blyintherealmofpolicyandregulatoryriskaswellasreputationalrisk.Table9buildsontheinformationsetoutintheprevioussectionandsummarisestheserisks.PressuresImpactsRisksAirpollutionRegulatoryClimatechangefromGHGconcentrationsposesarisktoshipownersfromnewemissionregulations.PhysicalHighrisktovessels,portsandcoastalcommunitieswithsealevelrise,stormsurge,andcoastlineerosion.RegulatoryVesselsandcompaniesmaybefinedforviolationsofsulphuremissionregulations(MARPOLAnnexVI).Damagetothehealthoflocalcommunitiesandcrew.WaterpollutionRegulatoryIncreasedawarenessofplasticpollution,oilspills,ballastwater,hullcoatingsandheavyfueloilemissionsincitespublicactionandcallsforregulatoryaction/fines.ReputationalRegulatoryModerateriskofcitizen/NGOaction.Higherriskforcruisesegmentduetodisruptionofmarinelife(e.g.banningofcruiseshipswhicharenotzero-emissionsfromNorwegianfjords(MarineLink2019)andtheBallastWaterManagementConvention(2004)(IMO2017)).ReputationalRegulatoryModerateriskoffinesfromlossofmarinehabitats.ExtendedProducerResponsibility(EPR)casesinlogis-ticsmaydrivenewregulations(Pouikli2020).ReputationalModerateriskofcitizen/NGOaction.TrafficandaccidentsRegulatoryAccidentsmaycostjobsandlossofcommunitysupport.Vesselroutesthatimpedeunfairlyonothermarineactivitiesmaycreatefinesforshipownersandlossofjobsforfishermenandtouroperators.MarketPhysicalHighriskofvesseldamageandseafarerinjuryfromcollisionswithothervessels,obstaclesormarinelife.Inaddition,damagecausedbysolids,plasticsorfishnetscaughtinpropellersmayharmvesseloperationsandcrew.OperationalLabourpoliciesandconditionsRegulatoryInadequatelabourpoliciesmayresultinfines,commu-nityactionsorlossofproductivity.Table9:OverviewofmaritimetransportationrisksandmaterialityTurnthetide:Howtofinanceasustainableoceanrecovery75MaritimetransportationCriteriaforsustainablefinanceBasedontheimpactsandtheirmaterialityoutlinedabove,theattachedCriteriaAnnexforthesustainablefinancingofthemaritimetransportationsectorisproposed.Thislistofcriteriaandtheirassociatedindicatorsofferrecommendationsforfinancialinstitu-tions.Theserecommendationsareto:avoidtheworstscenarios,challengeareasforimprovement,orseekoutbestpractice.Mostcriteriaapplytoallvessels,followedbyspecificcriteriaforfoursegments:fossilfueltankers,offshoreplatforms,cruise/ferry/recreationvesselsandshipconstruction/destruction.FromrisktoopportunityInadditiontopreservingassetvalues,maritimeindustryplayersareconstantlylookingforcostandefficiencygains.Therefore,financingandinsuringonlysustainablepracticeshelpsshipownersto:◾Reduceoperatingcosts,withrenewableenergyandefficiencyimprovements;◾Maintaincompliancewithemissionsandwasteregulations;◾Gainmarketsharewithcharterersandcustomersseekinggreenlogistics;and◾Maximizetheresidualvalueandoperatingintegrityofvessels.“TheOceanDataAllianceisproudtohavecontributedtothe“TurningtheTide”reportbyUNEPFI.Thispractical,hands-onguideprovidesvaluableuse-caseexamplesthatillustratehowfinancialorganizationscaninvestinsustainableandprofitableoceanprojectsinshipping,seafood,ports,coastaltourismandmarinerenewableenergy.Formorethanacentury,humanshavewithdrawnthenaturalcapitaloftheoceantofuelthegrowthofnations.Withtheideasandexamplesinthisreport,wecanplotanewcoursethatbalancesreturnsforpeopleandthebiodiversityoftheoceanthatwegovern.”StevenAdler,CEO,OceanDataAllianceTurnthetide:Howtofinanceasustainableoceanrecovery76MaritimetransportationHowever,shipandplatformownerswhoacknowledgethesebenefitsmaynotinvestingreentechnologiesunlesstheycandosowithoutaddingtocurrentcostsordebtlevels.Inpracticethisoftenmeansthatfinanciersandcharterersformpartnershipswithship-ownerstofundthetransitiontosustainability.Currently,thesplitincentivesofownersandoperatorscauseissueintheuptakeofretrofittingsustainabletechnologiestovessels(Longarela-Ares,Calvo-SilvosaandPérez-López2020).However,thereareattemptstodecreasetheincentivegapandtoformpartnershipsintheindustryinordertoadvanceprogressinsustainability.OneexampleofthisistheSeaCargoCharter,whichsetsoutaframeworkforassessinganddisclosingthealignmentofcharteringactivitieswiththeaimofpromotingdecarbonisationofshipping(SeaCargoCharter2020).“With90%oftradeusingsearoutesandtheoceaneconomyactingasanemployerformillions,theshippingindustryhasakeyroleinprotectingthefutureofouroceanandsupportingsustainablegrowth.Lloyd’sRegisterwelcomesthepublicationof‘TurningtheTide’,whichhighlightstheworkunderwaytosupportasustainableoceaneconomy,aswellastheactionsthatbanks,insurersandinvestorsarecollectivelyrequiredtotakeinthedecadeahead.”NickBrown,CEO,Lloyd’sRegisterTheEuropeanParliament,observingtheIMO’sgoalofatleast50%decarbonisationoftheglobalfleetby2050,encouragesaseriesofsolutionsincluding:◾scaledregulationonbothglobalandregionallevels;◾shipowner-chartererpartnerships;◾scalingofalternativefuelsupplychains;◾installingcleanauxiliarypowersystems;and◾operationalefficiencymeasures.(Europarl2020b).Financialstakeholdersmayassistinmanyofthesesteps,whichareconsistentwiththisguidance.Sustainablefinanceandindustryinitiativesforshipping,suchasthePoseidonPrinciples(PoseidonPrinciples2020),havealsobeengainingattention.Progressondecarbonisationischallengingbecausetheexternalcostsofmaritimetransportation—suchasGHGemissions—arenotinternalisedinitspriceandbecauseofconsiderablenationalfossilfuelsubsidiesinshipping(DanielandYildiran2019).Oper-ationalefficiencymeasuressuchasoptimisingshipspeedandroutescouldcutCO₂emissionsby5%(ibid).Energyefficiencyimprovementsinshipdesignandwindassis-tancetechnologycoulddeliverreductionsof30–55%(EnergyTransitionsCommission2019).However,fullydecarbonisingshippingrequiresshipownerstomoveawayfromconventionalheavyfueloiltoalternativepower.Shipownersidentifytwomainhurdlestoadoptingalternativefuelsandgreentechnologies—priceandavailability(LloydsRegister,UMAS2020).Turnthetide:Howtofinanceasustainableoceanrecovery77MaritimetransportationChartererscommittedtogreenlogisticsarebecominganactiveleverfordecarboni-sation.Fromafinancingstandpoint,charterersarepartofthesolutionwhentheyhelpturnacapitalexpense(zero-emissiontechnologies)intoanoperatingexpense(lowerfuelcosts)by,forexample,financingthefirstyearsofgreenpowerinstallations.Inves-tors,lendersandinsurersmayplayarolebysupportingtheseshipowner-chartererpart-nerships.Discussionsarealsounderwayregardinganindustry-managedcarbonfundforgreenshippingresearchandinstallations(LloydsList2020b).Infact,theIMOhasagreedtopursuedevelopmentofagreentechnologyresearchfund,supportedbyafuellevyfromtheindustrythatmayreachUSD5bn(TradewindsNews2020).Shipownersbearthemostriskinthetransitiontosustainability,asshownbythequalita-tiveassessmentbelow.Greaterparticipationisrequiredfromthethreeotherstakeholdergroups(cargoowners,financiersandsupplychains).Table10showstherisksandobstaclesfacedbyeachstakeholderinthemovetodecarbonizemaritimetransportation.Risks/ObstaclesShipownersCargoownersFinanciersSupplychainsCapitalinvestmentHighLowHighHighTechnologicalreadinessHighLowMediumHighRegulatorysupportHighLowHighMediumTradevolatilityHighHighMediumMediumTable10:RisksandobstaclestodecarbonisationbystakeholderFormaritimeinsurers,discussionshavetraditionallyfocusedonaccidentaloilspills,whichcancausedamagetophysicalpropertyandassets,ecosystemsandnaturalhabitats.Morerecently,thefocushasexpandedtoincludetheproductionofwaste,airandballastwaterpollution(IUMI2020).Abreachofregulationsmaygiverisetofinesandcriminalchargesagainstofficers,crewandthecompanyitself.Manyinsurersbuildsustainabilitycriteriaintounderwritingcontracts(UNEPFIPSI2012;IUMI2020).Avesselthatdoesnotcomplywithregulationsisinbreachofwarrantyandinsurancecapacity.Itisrecommendedthatfinanciersandinsurerstothemaritimeindustryensurethatclientspossessallrelevantcertificatesandareinfullcompliancewiththeregulations,conventionsandstandardsissuedbytheIMO,nationalandindustrybodiespertainingtotheassetoroperationinquestion.Standardsarealwaysevolvingandthisguidancedeferstotheexistingstandards.Bothfinanciersandtheirclientsneedtostayup-to-dateonallcomplianceissues.ItisalsorecommendedthattheguidanceonMarineTrans-portationfromtheSustainabilityAccountingStandardsBoardbereviewed(SASB2021).Turnthetide:Howtofinanceasustainableoceanrecovery78MaritimetransportationCasestudiesThissectionpresentsthreecasestudiesoffinancialinitiativesthatdemonstratehowtargetedfinancecandriveprogressinsustainableshippingwhileaddressingtherisksandimpactsdiscussedabove.SustainabilityLinkedLoan(SLL)–SeaspanInOctober2020SeaspanCorporation,awhollyownedsubsidiaryofAtlasCorpannouncedtheclosingofitsUSD200msustainability-linkedloan(‘SLL’),whichisfullyunderwrittenbySociétéGénéraleandBNPParibas.Thiswasthefirstgreenloaninthecontainershippingsector.BingChen,ChiefExecutiveOfficerofAtlasnotedthedeal“alignsSeaspan’slong-standingcommitmenttosustainabilitywithourcapitalstructurestrategy.”SLLpricingisadjustedbasedonSeaspan’sachievementsmeasuredagainsttwokeyperformanceindicators(KPIs).ThefirstaimsatmeasuringthealignmentofthecarbonintensityofthecollateralvesselswiththeIMO’s2050decarbonisationtrajectory.Thesecondlookstofostercooperationwithcharterersinordertoadvancethedecarboni-sationagenda,byseekingtoincludesustainability-linkedprovisionsinfuturechartercontracts,hencecreatinganinnovativevaluechainapproachtodecarbonisation.TheloanitselfwasframedtoalignwiththePoseidonPrinciples,whichpromotetrans-parency,accountabilityandthedecarbonisationofshippingthroughlendingdecisions(PoseidonPrinciples2020).Usingaverageefficiencyratio(AER)asaperformancemetricforships,thePoseidonPrinciplesprojectcompliancewillresultinlower-riskloanportfolios,strongercashflowsandhighervesselassetvaluesthroughmoreeffi-cientships(MarineMoney2020b).ThisdevelopmenthighlightshowfinancialinstrumentscansupportsustainabilitytargetsandthatfollowingthePoseidonPrinciplescanalignfinancialandcorporatestrategies.Rewardingsustainabilityperformance–MaerskIn2018Maerskannounceditscommitmenttobecomingcarbonneutralby2050(FinancialTimes2018).In2020MaersksecuredaUSD5bnrevolvingcreditfacilitywithasyndicateof26bankscommittedtogreeninvestments(SeatradeMaritimeNews2020).ThecreditmarginunderthefacilitywillbeadjustedbasedonMaersk’sprogresstomeetitstargetofreducingCO2emissionspercargomovedby60%by2030,whichismoreambitiousthantheIMOtargetof40%by203021(ibid).ThisnewfinancefacilityaffirmsMaersk’seffortstodrivesustainabilityintoitsoperationsandsupplychains.21Bothtargetsarebasedona2008baseline.Turnthetide:Howtofinanceasustainableoceanrecovery79MaritimetransportationThenewfinancefacilitywassubstantiallyoversubscribed,reinforcingtheopportu-nityforfinancierstoleadshipping’stransitiontosustainability(MarineMoney2020c).BasedonMaersk’sexperiencewiththecreditfacility,rewardingshipownerswithfinancingtermsforoutperformingIMO2030emissionsreductiontargetsisapromis-ingmechanismtodrivesustainabilityprogressintheindustryandcreatenewopportu-nitiesforgreeninvestments.Greenfinanceformultiplebusinessunits–BonheurShippingIn2020BonheurShippingissuedaNOK700mgreenbond,inaccordancewithitsGreenBondFramework,whichsetsouthowthebond’sproceedsaretobeusedinthepromotionofthetransitiontowardslow-carbonandclimate-resilientdevelop-ment.Proceedsfromtheissuancewillbeusedforfinancingandrefinancingrenew-ableenergyprojectsandoffshorewindvesselsandrelatedequipment(MarineMoney2020d).DNBMarketsandSpareBank1Marketsservedasjointleadmanagersforplacementofthebondissuance.Separately,thoughbuildingoffofthesameframework,whichalsoappliestogreenlending,oneofBonheur’sbusinessunits,Fred.OlsenWindcarrier,receivedanEUR75mloanfromDNBBankandSparebank1SR-Bankforthreewindturbineservicevessels.Thiswasusedtorefinanceanexistingdebtfacilityaswellasforupgradingoneoftheservicevessels(RenewablesNow2020).TakeawayThiscasestudyshowsthataligningagreencorporatestrategywithfinanceimprovescapitalaccess,andmaybeappliedtobenefitseveralbusinessunits.CircularEconomyFinance–NavigarCapitalLeasingstrategiesarenotnewtoshippingfinance,sincemostvesseltypeshaveareliabledepreciationhistoryonwhichtomodelthefinancing.However,newtechnolo-giesthatspeedthetransitiontogreenshippingdonothavesuchdocumentation.ThismakesDenmark’sNavigarCapitaloneofthefinancialinnovatorsthatarebringingleas-ing,withthehelpofmajorpensionfunds,tosupportshipownerswhoarecommittedtosustainability.In2017NavigarCapitallaunchedtheMaritimeInvestmentFundI,whichgeneratedUSD450mfortheleasingofshippingequipmentwithafocusongreentechnologies.In2020thiswasfollowedbyFundIIwithUSD300m,againfromDanishpensionfunds,tocontinuegreenshippinginvestments.TakeawayLeasingisacirculareconomystrategy,permittingshipownerstoinstallandtestgreentechnologieswithoutmakingalargecapitalexpense.Assuch,leasingcanincreasethefinancialviabilityofgreentechnologyinstallationsandofferanapproachtoclosingtheowner-operatorincentivegapdiscussedabove.Turnthetide:Howtofinanceasustainableoceanrecovery80MarinerenewableenergyMarinerenewableenergyTurnthetide:Howtofinanceasustainableoceanrecovery81MarinerenewableenergySectorandfinancialoverviewMarinerenewableenergyrefersheretotheproductionofrenewableenergyinthemarineenvironment.Itincludesabroadrangeofpossiblesub-sectors,includingoffshorewind,wave,tidal,floatingsolar,oceanthermalenergyconversion(OTEC)andanumberofothermoreconceptualtechnologies.Differentrenewablestechnologiesareatdifferentstagesintheirgrowthcycle.Whileoffshorewindisamaturetechnology,waveandtidalenergyremainclosertotheproof-of-conceptstage.Themostmatureofthesesectors—andsubjectofthemajorityofthisguidance—isoffshorewind.Favourableregulationcontinuestobeakeyfactorinthecontributionofmarinerenew-ablestotheenergymix.InnorthernEuropeoffshorewindisincreasinglycompetitivewithnon-renewableenergy(Jansenetal.2020),butinothermarketsworldwidethereisacontinuedrelianceonfavourableregulationtoenableinvestmentandovercomethehighcostsofcapitalassociatedwithdevelopmentofmarinerenewables.Thiscreatesaclearroleforpublicinstitutionsinprovidingfavourableconditionsforrenewablestothrive—notablyinthecontextofsubsidiesforrenewableenergygeneration.Anoteonfloatingoffshorewind,tidalandwaveenergyWhilefixedoffshorewindcontinuestodominatetheinvestmentlandscapeformarinerenewableenergy,otherformsaregrowinginprominence.Theguidancebelowdistinguishesbetweenfixedoffshorewindandtheseothersourcesofrenewableenergy.Particularlynoteworthyhereisfloatingoffshorewind.Whileitsharesmanyfeatureswithfixedoffshorewindfromaplanningpointofview,therearesomeimportantdifferencesinimpactsonseabeddisturbance,pollutionandwildlifedisruption(notablywithrespecttoanchoragedisruptingseabedandentanglementendangeringwildlife).Asaresult,floatingandfixedoffshorewindaresplitoutanddiscussedseparatelyinthecriteriaformarinerenewableenergy.Tidalandwaveenergyareparticularlyearly-stagesectors,andwhileitisreason-abletoassumetheywillsharesomecommonimpactsfromancillarystructures(cabling,anchoring)andconstruction/decommissioningimpactswithoffshorewind,limitedinformationisavailableonfurtherimpacts.Aprecautionaryapproach,basedonatransparent,collaborativeandscience-ledeffort,isstronglyadvisedforthesustainabledevelopmentofthesenascentsectors.Asnewsectorsofmarinerenewableenergy(includingtidalandwaveenergy,aswellasoceanther-malenergyconversion(OTEC)andfloatingsolar)mature,additionalguidanceandcriteriamaybedevelopedfortheirsustainablefinancing.Turnthetide:Howtofinanceasustainableoceanrecovery82MarinerenewableenergyOffshorewindprojectscanbeeitherfixedinstallations(whicharepiledorboredintotheseabed,andviableinwaterupto~50mdeep)orfloatinginstallations(whichareanchoredtotheseabedbutfloatonthesurface,andviableinwater<200mdeep).BecauseoffshorewinddevelopmenttodatehasbeenlargelyfocusedontherelativelyshallowNorthSeabasin,fixedinstallationsarethemorecommon(generatingapproxi-mately22,000MWinEurope)andreceivethemajorityofinvestment.Floatingoffshorewind(currentlygenerating45MW[WindEurope2019])islikelyasourceofsignificantfuturegrowthduetoitsgreaterworldwideapplicability.IRENA,theInterna-tionalRenewableEnergyAgency,projectsinstalledcapacityforglobaloffshorewindandothermarinerenewablestoreach231GWand9GWperannum,respectively,by2030(IRENA2014).Thetechnicalpotentialforoffshorewind,includingbothfixedandfloatingfarms,isvast,withtheInternationalEnergyAgency(IEA)estimating36,000TWhperyearinwaterlessthan60mdeepandlessthan60kmfromshore—incomparisonwiththe23,000TWhconsumedgloballyin2019(IEA2019).WhileEuropewillcontinuetobeahotspotforoffshorewinddevelopment,ofadditionalnoteasparticularlypromisinggeographiesforoffshorewindinstallationsareChina,South-EastAsia,theGulfStates,India,Canada,theCaribbeanandoffthecoastofEastAfrica(IEA,2019)wherewindspeedsarereliablyhigh.Althoughlesscommerciallyattractiveandatanearlierstage,opportunitiestodevelopnewertechnologiespersist—notablytidalenergyandfloatingsolar,whichappearclosesttocommercialviabil-ity,alongsidelessadvanceddevelopmentsinwaveenergyandoceanthermalenergyconversion(OTEC).“Theoceanoffersenormouspotentialtoprovidefood,createjobs,andproducerenewableenergy.It’sourresponsibilitytorebuildoceanprosperity—andtheUNEPFIguidancegivesusthetoolstodosoinanequitable,sustainable,andrestorativeway.”JenniferMorris,ChiefExecutiveOfficer,TheNatureConservancyTurnthetide:Howtofinanceasustainableoceanrecovery83MarinerenewableenergyFinancingthesectorAsindicatedbytheresultsofthesustainableblueeconomyfinancesurveyundertakeninSeptember2020,mostrenewableenergyfinanciersareEuropean(Figure7).ThisisunsurprisinggiventherelativedevelopmentofrenewableenergyintheEuropeanmarket,particularlyinnorthernEuropewhereoffshorewindhastakenhold,incomparisontomostoftheworld.22InEurope,developmentrightsforfarmdesignationsareauctionedoff23towinddevelopers,notablyDanishmultinationalØrsted,NewYork-basedinfra-structureinvestmentfundGlobalInfrastructurePartners(GIP),SwedishmultinationalVattenfall,andBritishenergycompanyScottishPowerRenewables,asubsidiaryoftheSpanishutilitycompanyIberdrola,itselfamajorwindinvestor.LatinAmerica&Caribbean14%NorthAmerica22%AsiaPacific14%Europe43%Africa&MiddleEast7%Figure7:Wheredoinstitutionsfinancingmarinerenewableenergycomefrom?Basedonreportedlocationofrespondentsfinancingmarinerenewableenergy.Formoredetailonsurveyresults,pleaseseetheaccompanyingreport‘RisingTide:MappingOceanFinanceforaNewDecade’(UNEPFI2021).22Thefirstcommercialoffshorewindfarm(sometimesreferredtoasawindpark),VindebywasinstalledinDenmarkin1991andhassincebeendecommissionedafterreachingitscommercialend-of-lifein2017.Duringthattimeandsince,thesectorhasgrownsignificantly,atarateof24%peryearsince2013(GWEC2020).23Oftenwithstatesupportthroughsubsidiestomakeoffshorewindmorecompetitivewithnon-renewableenergy,thoughthesesubsidiesareshrinkingasthesectorbecomesmoremainstream.Turnthetide:Howtofinanceasustainableoceanrecovery84MarinerenewableenergyInaddition,althoughlimitedbysamplesize,thesurveysuggeststhatcorporatefinancefeaturesstronglyalongsideshares,tradefinanceandprojectfinanceinfinancingmarinerenewableenergy(Figure8).Thispointstothelargescaleofcapitalrequiredtofinancemarinerenewableenergydevelopment,notablyoffshorewind.Otherstudieshaveemphasizedinparticulartheimportanceofprojectfinanceformarinerenewableenergyduetothelargescaleofinvestmentrequiredandthelimitednumberofdevelopersabletofinancethehighcapitalrequirementsofoffshorewindfarmsontheirownbalancesheets(WindEurope,2019).Althoughnotfeaturedinthesurvey,sovereignwealthfundsplayaprominentroleinoffshorewindfinancing,notablythroughNorway’sNorgesBankInvestmentManage-ment(NBIM)(NBIM2018).Green-andblue-labelledbondsfeaturealsomorepromi-nently,reflectingthewidertrendforgreenbondissuancesforrenewableenergyinvestment,24aswellasthegrowingprominenceofmarine‘bluebonds’(greenbondstailoredtowardstheblueeconomy).Corporatefinancing(inc.corporatebondsandcorporateloans)Tradefinance(inc.e.g.export-importguarantees)Shares(i.e.activeorpassiveshareholding)Projectbonds/ProjectfinanceWorkingcapitalloansGreen/BluelabelledbondsDerivativesInsuranceConcessionalfinancing(i.e.below-market)Riskmitigationinstruments(e.g.first-losscapital)PrivateequityFlexiblecapital(e.g.convertibledebt/equity)01234567Debtconversion11Other133224445556MostcommonfinancialinstrumentsinmarinerenewableenergysectorFigure8:Chartofinvestmentinmarinerenewableenergybyfinancialinstrument(UNEPFI2021)Thebarsindicatethenumberoffinancialinstitutionsexpressingtheuseofaninstrumenttofinancethissector.Eachfinancialinstitutionwasabletoselectuptothreeinstrumentspersector,outofapoolof14respondents.Formoredetailonsurveyresults,pleaseseetheaccompanyingreport‘RisingTide:MappingOceanFinanceforaNewDecade’(UNEPFI2021).24In2018morethanhalfofgreenbondproceedswereearmarkedforenergyprojects(ClimateBondsInitiative2018).Turnthetide:Howtofinanceasustainableoceanrecovery85MarinerenewableenergyKeyenvironmentalandsocialimpactsanddependenciesRenewableenergysetsouttoreducesignificantlythegreenhousegasemissionsasso-ciatedwiththeproductionofenergy,andonaverageitsclimatefootprintissignificantlylowerthannon-renewableenergy(Pehletal.2017).Windenergyinparticularcarriesthelowestimpactintermsofcarbonemissions.Thusrenewableshaveaclearandvitalroletoplayintheenergytransitionandpoweringadecarbonisedeconomy.However,despitebenefitsforreducedcarbonemissions,thereareanumberofpressuresexertedonsocietyandtheenvironmentthatareimportanttoconsiderindevelopingguidanceformarinerenewableenergyfinancing.Thisandsubsequentsectionswillfocuspredominantlyonoffshorewindinstalla-tions,wherethemajorityofinvestmentanddevelopmentofmarinerenewableenergycurrentlylies.Foroffshorewind,keydriversofimpactaretheplanning,construction,operationanddecommissioningstagesofoffshorewindfarms.Acrossthesedrivers,fourtypesofpressureareexertedonsocietyandtheenvironment.Table11highlightsthemostsignificantimpactsfromeachofthesepressurecategories.Notethatforeachofthese,secondaryimpactsinrelatedareas(forexample,pollutionwillalsoaffectecosystemhealthinadditiontoanimalwelfare)mayexist.Turnthetide:Howtofinanceasustainableoceanrecovery86MarinerenewableenergyPressuresImpactsSeabeddisturbanceanddisrup-tionofhabitatDuringconstruction,operationanddecommissioningofwindfarmstheseabedisdisturbedbyheavyequipment,whichmakestheecosystemlessresilientduetohabitatdegradationandloss.Impactsarisemainlyduetosuspendedsediment,whichcanaffectsensitivehabitatsandnearbyorganisms.Sitingawindparkinanareaofhighbiodiversityorwithafragilehabitatwillhaveadeleteriouseffectonbothbiodiversityandhabitats.PollutionOngoingsourcesofnoisewilldisruptanddistressmarineanimals,nota-blymarinemammals.Ongoingpollutionstemmingfromregularmainte-nanceactivitiesandservicevesselswillalsocontributetoreductionsinanimalwelfare.Excessheatandelectromagneticfieldgenerationfromunderseacableswillaffectanimalwelfareatalocalscale.Thisalsocoverspotentialpollutionfromwastetreatmentassociatedwithwindfarms,particularlyatdecommissioning.DisruptionofwildlifeThereispotentialforimpactfromcollisionsbetweenturbinesandbirdsandbats,especiallyduringmigratoryevents.Turbinebladesarenotreadilyidentifiabletoflyingbirdsandbats,increasingtheriskofcolli-sioncausinginjuryorlossoflife.Thereisalsotheriskofentanglementofwildlifeinmooringlinesandanchorageassociatedwithfloatingoffshorewind.UseconflictSocialconflictmayarisebetweenstakeholdergroupsincrowdedmarineenvironments,whereestablishedindustries,suchasfishing,mayobjecttowindparksbeingbuiltinexistingfishinggrounds.Useconflictcanleadtopotentialimpactsonlivelihoodsecurityandculturalidentityforaffectedgroups.Table11:PressuresandimpactsofmarinerenewableenergyTurnthetide:Howtofinanceasustainableoceanrecovery87MarinerenewableenergyRegionalexample:OffshorewinddevelopmentintheNorthSeaAmongthemostdevelopedmarketsforoffshorewindworldwideisinEurope’sNorthSeabasin,arelativelyshallowmarginalseaoftheAtlanticOceanbetweentheUnitedKingdom,Scandinavia,theNetherlandsandGermany.Theeconomicdevelopmentofitssurroundingcountries,highaveragewindspeeds,andthelargeareaofshallow(<50m)seabedmakeitanideallocationforthedevelopmentofextensiveoffshorewindfarmsintheexclusiveeconomiczonesofitscoastalstates.Asaresult,extensiveinvestmentinoffshorewindhastakenplace,notablyinGermany,theUnitedKingdomandDenmark,withsubstantialdevelopmentsplannedintheNeth-erlands.Currentinstalledcapacityacrossthebasinisestimatedatover16,900MW(WindEurope2019).Asaheavily-traffickedmarginalseahometoEurope’sthreelargestportsaswellasasizeablefishingpresence,theNorthSeaisaparticularexampleofsomeofthechallengesfacingeconomicdevelopmentandtheneedforspatialplan-ningtoavoiduseconflictbetweenstakeholdersandminimisehabitatdisruption.Figure9demonstratessomeoftheexistingterritoriesearmarkedforspecificusesintheDutchEEZ.Bright,paleanddottedredareasdenotecurrent,underconstructionandfuturewindfarmdevelopmentrespectively,woveninandaroundshippinglanes(blue),sandextractionareas(yellow),Natura2000protectedareas(greenboxes)andmilitarytraininggrounds(clearboxes).ThemapmakesitclearthatanintegratedandcoordinatedapproachtothedevelopmentofmarinespacesisessentialinareasasdenselydevelopedastheNorthSea,withsimi-larlevelsofcoordinationandintegrationrequiredinsimilarlycrowdedmarinespacesworldwide.Notethatthismapdoesnotincludeoilandgasactivities,sandextraction,telecommunicationscablesorcommonfishinggrounds,thelatterofwhicharethesourceofgreatestlikelyconflictasthesearenotasspatiallyfixedastheothersectors.Todate,tensionbetweenwindfarmdevelopersandfishinginterestshaveemergedacrosstheNorthSea(Politico2017).Asaresultofthiscomplexity,thepressureshigh-lightedinTable11aboveareparticularlysensitiveforfinancialinstitutionslookingtotheNorthSeaoranyothercrowdedmarinespaceforopportunities.Turnthetide:Howtofinanceasustainableoceanrecovery88MarinerenewableenergyPolicyDocumentontheNorthSea2016-20212IntegratedmaritimespatialpolicymapFigure9:IntegratedmaritimespatialpolicymapoftheDutchNorthSeaEEZ(GovernmentoftheNetherlands,2016)Turnthetide:Howtofinanceasustainableoceanrecovery89MarinerenewableenergyRelationshiptoothersectorsoftheblueeconomyMarinerenewableenergyiscloselylinkedtoanumberofothersectorsoftheblueeconomy,notablyseafoodandshipping,bothofwhichoperateinandaroundoffshorewindfarmsandmayhavetheiroperationsaffectedthroughoutthelifecy-cleofawindfarm:◾Interactionswithseafoodmaybebothpositiveandnegative.Whilethesitingofwindfarmsinorneartraditionalfishinggroundsmaysignificantlyimpactfishingoperationsandleadtoconflictbetweenstakeholdergroups,positiveimpactsarealsopossible,notablyforaquaculture,incontextswherenewwindfarmsmayprovidesubstratefore.g.oysterbedsorotherstaticorganismsthatmaybefarmed.◾Windfarmsmayalsohaveaminorimpactonshippingwherefarmsaresitedonornearmajorshippinglanes,resultinginthedrawingupofnewlanesandpotentialadditionalcostsformerchantvesselsthroughgreaterfueluse.OutliningmaterialityTheaboveimpactscreateanumberofmaterialriskstofinancialinstitutions,notablyintherealmofpolicyandregulatoryriskaswellasreputationalrisk.Table12buildsontheinformationsetoutintheprevioussectionandsummarisestheserisks.“Fornearlyadecade,RockefellerAssetManagementhasfocusedonblueeconomyinvestinginourpursuitofalphaintandemwithpositiveenvironmentalandsocialoutcomes.WeexpecttheTurningtheTidereporttoprovideaclearframeworkthatcanguidebusinessandinvestmentdecisions.Welookforwardtoservingourclientslong-terminvestmentobjectiveswhilehelpingtoadvanceprogresstowardsustainabledevelopmentgoal14(Lifeunderwater).”DavidHarris,CFA.ChiefInvestmentOfficerandPresident,RockefellerAssetManagementTurnthetide:Howtofinanceasustainableoceanrecovery90MarinerenewableenergyPressuresImpactsRisksSeabeddisturbanceanddisrup-tionofhabitatReputationalWindparksitinginareasofhighbiodiversityand/orcriticalhabitatmaybecomeasignificantsourceofcivilsocietycampaigningandpublicpressure.RegulatoryInthecontextofmarinespatialplanning,regula-toryriskexistswheredevelopmentconflictswithdesignationsofprotectedhabitatsandvulnerablespecies,thoughinstancesinwhichthesedesigna-tionsshiftaftersignificantinvestmenthasalreadybeenmade(asopposedtoduringthemappingorauctioningphasesofdevelopment)donotappeartobelikely.PollutionReputationalNomajorcampaignsareunderwayrelatedtopollutionfromrenewableenergy.However,marinemammalsarestronglyfavouredbythepublicandpublicpressureregardingtheirwelfaremayemergeinfuture.DisruptionofwildlifeReputationalBiodiversityisoneofthemostlikelyissuesforsustainedcampaigningfromcivilsocietyaroundoffshorewind.Unlessmitigated,publicopinionmaybeswayedtosuchanextentthatopera-tionsortheattractivenessofoffshorewindinthemarketisimpacted.Regulatory(wheretherearelegallimitsonanimalmortality)AlreadytherearelimitationsonoperationsduringpeakmigratoryperiodsforbirdsandbatsinNorth-ernEurope.Anyfuturedevelopmentofwindparkswilllikelybesubjecttoregulatorylimitsonbirdandbatmortalitythatmaycurtaildevelopment.UseconflictReputationalConflictsbetweenusersofthemarineenviron-mentalreadyexist.Campaigningfromfishinginterestsislikely,andunlessmanagedthroughaninclusiveMSPprocessislikelytogrowasmorewindparksareestablished.Whiletheenvironmen-talandsocialimpactislimited,thefishingindustryistraditionallywellorganisedandloudwhenitcomestocampaigning.Table12:OverviewofmarinerenewableenergyimpactsandmaterialityTurnthetide:Howtofinanceasustainableoceanrecovery91MarinerenewableenergyCriteriaforsustainablefinancingBasedontheimpactsandtheirmaterialityoutlinedabove,theattachedCriteriaAnnexforthesustainablefinancingofthemarinerenewableenergysectorisproposed.Thislistofcriteriaandtheirassociatedindicatorsofferrecommendationsforfinancialinsti-tutions.Theserecommendationsareto:avoidtheworstscenarios,challengeareasforimprovement,orseekoutbestpractice.Foreaseoforganisation,thesecriteriahavebeenstructuredonthebasisoftheirappli-cation—beitcommonacrossmarinerenewableenergy,fixedoffshorewind,floatingoffshorewind,waveortidalenergy.RefertotheCriteriaAnnexformoredetailedinformationTurnthetide:Howtofinanceasustainableoceanrecovery92MarinerenewableenergyFromrisktoopportunityDespitethesignificantlylowercarbonfootprintofmarinerenewableenergy,thereareneverthelessanumberofsocialandenvironmentalimpactsfromthedevelopmentofmarinerenewables.Asmarinerenewablesgrowinprominence,thereisaclearneedforgreaterclarityontheirimpactsonsocietyandtheenvironmentaswellashowtheyinteractwithotherusersofthemarineenvironment.Increasingthelevelofknowledgeandunderstandingoftheenvironmentalimpactof,forexample,installingnewwindturbinesontheseabed,isvitaltoensuringthatbestpracticecanbedeveloped.Further,utilisingintegratedplan-ningprocesses,notablyMarineSpatialPlanning(MSP),tocreateaclearframeworkfordividingupmarinespacesamongmultipleusersisanotherbeneficialsteptotakeinscalingupmarinerenewables.Fortunately,bestpracticeforwhatconstitutessustain-ablerenewableenergydevelopmentisemerging,particularlywithregardtotheinterac-tionbetweenmarinerenewablesandwell-implementedMSPprocessesandsensitivitiesaroundbiodiversityandprotectedhabitat.Here,governmentsaswellascivilsocietyandacademiahaveaclearroletoplayincreatingasustainableapproachtodevelopmentofmarinerenewables,tobecomple-mentedbyinstitutionslookingtofinancenewandexistingdevelopments.Todate,giventheadvancedstateofoffshorewinddevelopment,theEuropeanUnionhasledthewayinproducingsuchguidance,forexamplepublishingrecommendationsfortheinterplaybetweenoffshorewindandmarinespatialplanningbestpractice(Jacquesetal.2011).Turnthetide:Howtofinanceasustainableoceanrecovery93MarinerenewableenergyCasestudySustainabilitypolicyandreporting–ØrstedAspecificexampleofanoffshorewinddeveloperproactivelyassessingandcommu-nicatingthesustainabilityconsiderationsaroundmarinerenewableenergyisDanishenergycompanyØrsted,whosesustainabilitypolicyandsubordinatepoliciessuchastheoffshorewindbiodiversitypolicy,25arespecificallytiedtotheimplementationoftheSustainableDevelopmentGoals(SDGs).Ørstedhasdevelopedasystematic,matrixedapproachtoidentifyingkeysustainabil-itychallengesthatarematerialtobothtotheirbusinessoperationsandstakehold-ers(includingpoliticalstakeholders,regulators,investors,NGOs,localcommunities,suppliersandemployees)(Figure10)toaddressintheiroperations(Ørsted2019).ThisprovidesaclearsensebothofhowØrstedcanprioritiseitsactionsforsustain-abilityandwhatmaydriveactionfromtheirshareholders.Threekeyareasoffocushavebeendeveloped:1.Aligningbusinesswithclimatescience;2.Addressingthepotentialimpactsofthegreenenergytransformation,and3.Ensuringresponsiblebusinesspractices.Ørstedhasdevelopedspecificprogrammesundereachheading,andreportsprogressannually,linkingspecificmilestonestoSDGtargetsandtheParisAgreement.◾Biomasssustainability◾Sustainablefinance◾Businesspartnerconduct◾Energyefficiency◾Reuseandrecyclingofmaterials◾Climateaction◾Greenenergydeployment◾Safety,health,andwell-being◾Biodversityimpactsandchangeineco-syetems◾Localsocio-economicimpactsMaterialsocietalchallengesaddressedin2019sustain-abilityprogrammesHighHighImportancetobusinessstrategySocietalchallengeslessmaterialtoourbusinessstrategyarenotaddressedthroughsustainabilityprogrammes.Forourperfor-manceonthese,pleasesee(ESGperformancereport,section2.11);Climateadaptation(implementationofTCFDrecommendations,page39);Juattransition(socio-economicimpacts,pages30–31)Societalchallengescurrentlynon-materialtoourbusinessstrategy:Accesstogreenenergyindevelopingcoun-tries;automationofwork◾Employeedevelopmentandretention◾Diversityandequalopportu-nity◾Useoftheoceanandlandforgreenenergy◾Businessethicsandtranspar-ency◾Informationsecurityandcyberattacks◾Responsibletax◾GreenandreliableenergysystemsImportancetostakeholdersFigure10:Ørstedmatrixofsocietalchallenges(Ørsted2019)Underthesecondfocusareaandinthecontextofoffshorewind,Ørstedplacespartic-ularemphasisonwindfarmsitingandstakeholderconsultationduringtheplanningphase,representingabestpracticeapproachasoutlinedinCriterion1ofthemarine25Ørsted.com/-/media/WWW/Docs/Corp/COM/Sustainability/Ørsted-Offshore-Wind-Biodiversity-Policy.ashx-?la=en&hash=062A5D7C9700A8D99FCDA1E016C67606Turnthetide:Howtofinanceasustainableoceanrecovery94Marinerenewableenergyrenewableenergyguidance,anddemonstratingasystemicapproachtoexploringmaterialityasoutlinedinCriterion6.Ørstedhasidentifiedtheprotectionofmarinebiodiversityasakeyprogramme,andhasdevelopedanapproachtostakeholderengagementinthecontextofwindfarmdevelopmentasanactivitytolimitandmiti-gatetheirimpactonmarinebiodiversity.ØrsteddevelopedtheiroffshorewindbiodiversitypolicyandhavepartneredwithWWFDenmarktounderstandanddevelopmitigationstrategiesforoffshorewinddevel-opmentonmarinebiodiversity.Theresultingareasoffocusforthecompanyinthecontextofmarinebiodiversityare(Ørsted2018):◾Potentialnoiseimpactonmarinemammalsfrominstallationofwindturbinefoun-dations(directlyrelevantformeetingCriteria3and4);◾Potentialimpactonbirds’migrationroutesandfeedinggroundsfromwindturbines(Criterion4);and◾Potentialimpactonseabedecosystemsandcoastalenvironmentsfrominstallationoftransmissioncables(Criterion5).TakeawayInthiscontextandinlightoftheirsustainabilityapproach,Ørsted’sfinancingofnewoffshorewinddevelopmentsthroughgreen-labelledbonds(forexamplethroughtherecentannouncementofnewissuancesinTaiwan26)canbeconsideredbestpracticeexamplesoffinanceforthesustainableblueeconomy.26orsted.com/en/company-announcement-list/2020/11/2119924Turnthetide:Howtofinanceasustainableoceanrecovery95CoastalandmarinetourismCoastalandmarinetourismTurnthetide:Howtofinanceasustainableoceanrecovery96CoastalandmarinetourismSectorandfinancialoverviewWorldwide,tourismisasubstantialcontributortotheglobaleconomy,representingapproximately10.3%ofglobalGDPin2019fromdirect,indirectandinducedimpact,27andprovidingoneintenjobs(WorldTravelandTourismCouncil[WTTC]2020).Tourismhasgrownsteadilyformorethanhalfacentury,andwasexpectedtocontinuetoexpandto1.8billiontouristarrivalsby2030(upfrom1.4billionin2018)(OECD2020a).In2019alone,tourismaccountedforUSD948bnincapitalinvestment,4.3%oftotalinvestmentworldwidethatyear.Pre-Covid-19,in2019tourismgrowthexceededannualGDPgrowthby40%andrepresented25%ofallnewnetjobsoverthepreviousfiveyears(WTTC2020).Itisclearfromtheseglobalfiguresthattourismisofenormoussignificancetotheglobaleconomyanddevelopment.Regionally,growthhasbeenmostsignificantintheAsiaPacificandMiddleEastregions,withChinadominatingtourismspendingat19%oftotalglobaltourismspend(ibid).Whileitisdifficulttoestimatetheprecisescaleofcoastalandmarinetourismasaproportionoftourismoverall,itisasubstantialcomponent,withWWFsuggestingthat80%ofalltourismtakesplaceincoastalareas(WWF2020).Asaresult,coastalandmarinetourismisasignificantpartoftheblueeconomyformuchoftheworld,withparticularimportanceinsmallislanddevelopingstates(SIDS),whichareespeciallyreliantontourism—intwothirdsofSIDS,tourismaccountsformorethan20%ofGDP(OECD2018).Foremergingmarkets,particularlythosewithcoastlinesthatmaybeattractivetotourists,coastalandmarinetourismthusrepresentsasignificantsourceofforeignexchange,incomeandlivelihoods,aswellasapotentialsourceofeconomicdevelop-ment.Indevelopedeconomies,coastalandmarinetourismcansimilarlyplayapromi-nentrole—withintheEuropeanUnion,coastalandmarinetourismisresponsibleforEU183bningrossvalueaddedin2011andrepresentsoveronethirdoftheoverallmaritimeeconomy(Ecorys2013).Regardlessoflocation,natureandbiodiversityarecrucialtothepopularityandsuccessoftourism.Severalstudiesandeffortsinrecentyearshaveattemptedtoarticulatethevalueofnaturetotourismandvisitorsandtheimportanceofensuringahealthyenviron-menttothelong-termsustainabilityofthesector(TEEB2010;NaturalCapitalCoalition2016).Forexample,some30%oftheworld’scoralreefsareofvaluetothetourismsector,withatotalvalueofUSD36bn(Spaldingetal.2017).27Wheredirectimpactreferstodirectspendingfrome.g.visitorexpenditure,indirectimpactreferstoe.g.capitalinvestmentinindustriesdirectlyinvolvedintravelandtourism.InducedimpactreferstothebroadercontributiontoGDPandemploymentofspendingbythosewhoaredirectlyorindirectlyemployedintourism(WTTC2020).Turnthetide:Howtofinanceasustainableoceanrecovery97CoastalandmarinetourismHowever,tourismisparticularlyvulnerabletoglobaleconomicshocks.Thiswasthecaseintheaftermathofthe2008globalfinancialcrisisandagainthroughtheglobalconsequencesoftheCovid-19pandemic,whichhassignificantlyimpactedthetour-ismsectorinparticular,withsubstantialuncertaintyaroundtherecoveryandlong-termfutureofthesectoratthetimeofwriting.TheOECDhasestimatedthatinternationaltourismwillfallby80%in2020asaresultofthepandemic(OECD2020b).Asaresult,bothtoensurethelong-termviabilityofthesectoranditsresiliencetoexter-nalshocksandclimatechange,thetransitiontowardssustainabletourismhasbeenidentifiedasamegatrendforthesector(OECD2018b).Thechallengesandimpactsresultingfromthepandemicmaypresentanopportunitytoreconsidertheroletourismhastoplayinthecontextofasustainableeconomygenerally,andasustainableblueeconomyinparticular.Sustainabletourismisaparticularfocusofdevelopmentcooper-ationfortourisminemergingmarkets,whichprovidedannualaveragesupportofUSD9.7millionperyearintheperiod2013–2018(OECD2020c).FinancingthesectorThesustainableblueeconomyfinancesurveyundertakeninSeptember2020byUNEPFIshowedcoastalandmarinetourismfinancingisdominatedbyinstitutionsbasedinEuropewith43%oftotalrespondents,followedbyNorthAmericawith22%(Figure11).However,asapercentageofoverallfinanceforthesustainableblueeconomy,LatinAmericafocusesontourismthemostwith18%oftheregion’sblueeconomyfinancing,comparedwithEurope’s14%(Figure12).Ahealthyoceancanprovideuswithhealthyfood,materials,solutionstoclimatechange,biodiversitylossanddecentjobs.Overtwothirdsoftheocean’sdirecteconomicvaluereliesonitsgoodhealth—thisisoneofthereasonswhyweneedtocatalysemorecapitalintothesustainableblueeconomy.MarenHjorthBauer.ManagingPartner&Founder,FyndOceanVenturesTurnthetide:Howtofinanceasustainableoceanrecovery98CoastalandmarinetourismLatinAmerica&Caribbean14%NorthAmerica22%AsiaPacific14%Europe43%Africa&MiddleEast7%Figure11:Wheredoinstitutionsfinancingcoastalandmarinetourismcomefrom?(UNEPFI2021)Basedonreportedlocationofrespondentsfinancingcoastalandmarinetourism100%60%80%40%20%90%50%70%30%10%0%Africa&MiddleEastAsiaPacificEuropeLatinAmerica&CaribbeanNorthAmericaSeafoodPortsMaritimeTransportationTourismRenewableEnergyFigure12:HowactiveareFIsacrosstheworldindifferentsectors?Basedonreportedactivityinblueeconomyfinancingbysurveyrespondents.Formoredetailonsurveyresults,pleaseseetheaccompanyingreport‘RisingTide:MappingOceanFinanceforaNewDecade’(UNEPFI2021).Turnthetide:Howtofinanceasustainableoceanrecovery99CoastalandmarinetourismSurveyrespondentscouldselectuptothreeinstrumentstypicallyusedforfinancingcoastalandmarinetourism.Onthebasisoftheirreplies,itisapparentthattourismisfinancedpredominantlythroughshares,workingcapitalloansandcorporatefinancing(combined52%oftotal,Figure13),reflectingthedominanceintourismoflargecorpora-tionsandmultinationals.Insurancealsofeaturesprominently,reflectingtheexposureoftourismtoanumberofrisks,notablyphysicalrisks.Theseareparticularlyacuteintour-ismduetoitsvulnerabilitytoclimate-linkedextremeweathereventsinlow-lyingcoastalareas.Asaresult,moreinnovativeinsuranceapproachessuchasparametricinsurancefeaturemoreprominentlyinthecoastalandmarinetourismsector.Shares(i.e.activeorpassiveshareholding)WorkingcapitalloansCorporatefinancing(inc.corporatebondsandcorporateloansInsuranceTradefinance(ince.g.export-importguaranteesProjectbonds/ProjectfinanceGreen/bluelabelledbondsFlexiblecapital(e.g.convertibledebt/equity011222344523456Deliverables1Donotknow1MostcommonfinancialinstrumentsincoastalandmarinetourismsectorFigure13:Investmentincoastalandmarinetourismbyinstrument(UNEPFI2021)Thebarsindicatethenumberoffinancialinstitutionsexpressingtheuseofaninstrumenttofinancethissector.Eachfinancialinstitutionwasabletoselectuptothreeinstrumentspersector,outofapoolof14respondents.Formoredetailonsurveyresults,pleaseseetheaccompanyingreport‘RisingTide:MappingOceanFinanceforaNewDecade’(UNEPFI2021).Turnthetide:Howtofinanceasustainableoceanrecovery100CoastalandmarinetourismKeyenvironmentalandsocialimpactsanddependenciesCoastalandmarinetourismcreatesanumberofsignificantpressuresonmarineandcoastalenvironmentsaswellassociety.Toassessthese,thisdocumentfollowsamodi-fiedDPSIR28frameworktocategoriseandorganisetherelationshipbetweentourismandenvironmentalandsocialimpact.Tourismisherebrokendownintofourkeycategoriesthatactasdriversofkeyimpactsontheenvironment.Theseare:◾Destinationdevelopment:e.g.theplanningandconstructionofnewtourismdestina-tions,includingaccommodation,infrastructureandattractions;◾Destinationmanagement:theoperationoftheaforementioneddevelopments;◾Visitors:thetouristsvisitingthedestination;and◾Vesseloperations:cruiseships.AnoteoncruisingCruising,whichisofparticularrelevancetotheblueeconomy,isnoteworthyforitssubstantialenvironmentalfootprint,thoughduetothevarietyofvesselsandoperationswithinthesector,itisdifficulttogeneralisetheirimpact.Nevertheless,onthebasisofbothcasestudyreviewsandmediacoverage,somecleartrendscanbeidentified.Cruisingisparticularlycarbon-intensive,withanaverage3000-passengervesselemittingapproximately1,200kgofCO2perkilometre(Caric2011).Inaddition,hulldischargesofanti-foulingpaintaswellasvesselnoiseduringoperationsaresignificantsourcesofpollution.Wasteandwastewaterproductionanddisposalareothernotablesourcesofconcern,withcruiseshipsproducingupto40litresofsewageand340litresofgreywaterperpassengerperday(ibid).Whilesignificantregulationsinthisspaceexist(USDoJ2016),andsubstantialfineshavebeenhandedtocruiseoperationsinviolationofexistingregulations,cruiselinesremainasourceofsignificantpressureontheenvironment.Withinthesedrivers,anumberofkeypressuresemergewithdistinctandsignificantimpactsoncoastalandmarineenvironments,aswellassocietymorebroadly.Whilesomepressuresaremoreprominentforcertaindrivers(e.g.invasivespeciesandvessels),otherssuchasphysicaldamagetohabitatmayresultfromanumber—orall—ofthedrivers.28Drivers,pressures,states,impactsandresponsesconstituteatypicalDPSIRframework.Here,thesearesimpli-fiedtodrivers,pressuresandimpacts.Turnthetide:Howtofinanceasustainableoceanrecovery101CoastalandmarinetourismTable13highlightsthemostsignificantimpactsfromeachofthesepressurecategories.Notethatforeachofthese,secondaryimpactsinrelatedareasmayexist(forexample,pollutionwillalsoaffectecosystemhealthinadditiontoanimalwelfare).RelationshiptoothersectorsoftheblueeconomyCoastalandmarinetourismfeaturesanumberoflinkageswithothersectors,particularlythroughcruising,whichisgovernedbymanyofthesameregulationsasshipping.Thus,guidanceforthissub-sectorshouldbeviewedascomplemen-taryto,andinconcertwith,shippingguidance.Throughtheirsourcingpolicies,hotelsandotherformsofaccommodationalsorelatecloselytoseafoodguidance,andsector-specificguidancehereshouldbeconsultedonbestpracticerelatedtowidersustainabilityissuesinseafood.PressuresImpactsPhysicaldamagetohabitatTourismisasourceofactivityinhabitatsthatcausesdamagefromconstructionaswellastraffic—whetherfrompedestriansorlargeocean-goingvessels,whichputpressureonnaturalhabitats.Thisisparticularlyprominentfromsitingtourismdevelopmentinareasofhighbiodiversity,ETPspecieshabitatorprotectedareas.Especiallythelossofvitalecosystemservicessuchasflooddefenceornurserygroundsforbiodiversityincriticalareassuchasmangroveforestsordunes.InvasivespeciesandendangermentBothterrestrialandmarinespeciesfacepressuresofendangermentduetoareductioninavailablehabitatandhabitatdegradation,vesselcollisions(inthecaseofmarinemammalsandcruiseships)andmistreatmentbytourists.Onthelatter,visitorsandvesselscanacci-dentallyintroduceinvasivespecies,especiallyfromcruiseshipballastwater.Invasivespeciescanout-competeindigenousspecies,resultinginpotentialbiodiversitylossesandconsequentreductionsinecosys-temresilience.GHGemissionsTourisminallitsformsisasourceofGHGemissions,thoughcruiseshipsinparticularareasignificantsourceofGHGemissionswithintourism.PhysicaldamagetowildlifeParticularlyassociatedwithvisitortrafficincriticalhabitatsaswellascollisionsbycruiseshipswithlargeanimals.Turnthetide:Howtofinanceasustainableoceanrecovery102CoastalandmarinetourismPollutionInadditiontoGHGemissions,tourismisasourceofotherpollutants,notablyplasticandotherformsofwaste(fromvisitors,accommoda-tionandotherbusinesses),sewage(fromaccommodationandcruiseships),NOxandSox(fromcruiseships),aswellasnoiseandlightpollution.SourcingandconsumptionTourismintroducesnewdemandforproducts,bothforconsumptionandsouvenirs.Howthesearesourced,particularlywhenfromETPspecies,aswellasfromoverfishedfishstocks,cancreatepressureonbiodiversity.LandgrabbinganddisplacementDevelopersmayparticipateincoercedresettlementorlandgrabbingofareasthatmayformattractivetourismdestinations.Thisresultsinalossofaccesstolivelihoodsforlocalcommunities,createssignifi-cantinequalityinopportunitiesandconstitutesahumanrightsviola-tion.Thiscategoryofpressuresisespeciallyconcerninginthecontextofdisplacementofalready-marginalisedminoritygroupsandimpactsonwomenandchildren.Thisfollowsasaresultofnewdevelopmentdisplacinglocalcommu-nitiesandtheireconomicopportunities.Thisalsocoverstheconse-quencesofpricediscriminationintourismdestinations.CulturalinfluenceTourismmayintroducepracticesorpressuresthatoutnumberlocalandindigenouscustoms,valuesandrights.Ifnotmanaged,thismayresultinviolationoftherightsofindigenouscommunities.Thisalsoincludestheconsequencesofover-tourismondestinationsandtheirculturalheritage.WorkforceexploitationTourismcanintroduceunethicalorunsustainablelabourpracticesindestinationsbyexploitationoflocalpopulations,migrantworkersandabuseoftheworkforcethroughunderpaymentorexclusionfromopportunities.Exploitationoflocallabourpoolsbythetourismindustrymayincludeinadequatepayorrespectofworker'srights,withconse-quencesforpovertyalleviation,particularlyindevelopingcountries.Table13:PressureandimpactsofcoastalandmarinetourismTurnthetide:Howtofinanceasustainableoceanrecovery103CoastalandmarinetourismOutliningmaterialityTheaboveimpactscreateanumberofmaterialriskstofinancialinstitutions,notablyintherealmofoperational,regulatoryaswellasreputationalrisk.Table14buildsontheinformationsetoutintheprevioussectionandsummarisestheserisks.PressuresImpactsRisksPhysicaldamagetohabitatPhysicalAkeydeterminantoftherisksassociatedwithtourismiswheretourismdevelopmentisplanned(inthecaseofimmovableassetssuchashotels)orscheduled(inthecaseofvessels)inthecontextofcriticalhabitats,resilienceandecosystemservices.Thesedecisionsmayimpactphysicalassets(e.g.intheeventofreducedresiliencetoweatherimpacts)aswellasimpactonoperationsforaccommodationanddestinations(e.g.intheeventofareductioninthelong-termviabilityandattractivenessofadesti-nation).OperationalInvasivespeciesandendangermentOperationalPotentialforlong-termdeclineindestinationvaluethrougherosionofquality.GHGemissionsRegulatory,Physical,OperationalGHGemissionsareasourceofregulatoryriskaspolicyrespondstoclimatechange,physicalrisktoassetsasimpactsofclimatechangebecomemoresevere,andreputationalriskasthepublic'saware-nessofclimatechangeanditsimpactsgrows.PhysicaldamagetowildlifeReputational,RegulatoryReputationalfallout,asevidencedbyacruiseshipcollisionwithacoralreefinIndonesiain2017,maybesevere,thoughsucheventsarerare.Regulatoryandreputationalrisksapplyinthecontextofphysicaldamagerelatedtoconstructionofnewdevelop-ments(e.g.resorts).PollutionReputational,RegulatoryAsplasticscontinuetodominatetheenvironmentalagenda,newandadditionallegislationpenalisingwasteindifferentmarketsislikelytoemerge,withpotentialimpactsonoperations.Furtherreputationalriskswillremainlikelyaspublicawarenessofplasticpollutionremainshighandtouristsavoidpolluteddestinations.SourcingandconsumptionMarket,ReputationalAsconsumersbecomeincreasinglyawareofsustain-ablesourcingtheymaychoosealternativeserviceprovidersonthisbasis.Turnthetide:Howtofinanceasustainableoceanrecovery104CoastalandmarinetourismLandgrabbinganddisplacementReputationalThereisreputationalriskassociatedwiththevisibilityofnegativesocialimpactoftourismoperationsonlocalcommunities,bothinthecontextofdisplace-mentaswellaslocalresistancetotourismdevelop-mentandover-tourism.CulturalinfluenceReputationalPotentialforfalloutfromreputationalrisk,buttheissueislesstangiblethanforlivelihoods.WorkforceexploitationReputationalSubstantialpotentialforfalloutfromreputationalriskfromexposureofmalpracticetopotentialcustomerbase.Table14:OverviewofcoastalandmarinetourismimpactsandmaterialityCriteriaforsustainablefinancingRefertotheCriteriaAnnexformoredetailedinformationBasedontheimpactsandtheirmaterialityoutlinedabove,theattachedCriteriaAnnexforthesustainablefinancingofthecoastalandmarinetourismsectorisproposed.Thislistofcriteriaandtheirassociatedindicatorsofferrecommendationsforfinancialinsti-tutions.Theserecommendationsareto:avoidtheworstscenarios,challengeareasforimprovement,orseekoutbestpractice.Turnthetide:Howtofinanceasustainableoceanrecovery105CoastalandmarinetourismWithintheguidance,referenceisalsomadetohowthesecriteriameetthespecificSustainableBlueEconomyFinancePrinciples,theSDGs,aswellasthestandardsoftheGlobalSustainableTourismCouncil(GSTC),amarket-leadingcertificationframeworkforsustainabletourism.29FromrisktoopportunityDespitethescaleofthechallengesfacingtourism,thereareopportunitiesforpositiveimpact.However,unlockingtheseopportunitiesoftenrequiresinnovationandriskfinanc-ingtosurfaceapproachestosustainabilityintourismthatareeffectiveandscalable.Atthesametime,theimpactoftheCovid-19pandemichascreatedanopportunitytopauseandreassessthewaysinwhichtourismdevelops,andworktotransitionthesectorasawholetoamoresustainablemodel.Thereareopportunities,whenbuiltuponsoundstake-holderengagementandsustainabledevelopmentprinciples,fortourismtoraiseaware-nessofenvironmentalissueswithvisitorsfromacrosstheglobe,aswellashelpfinanceconservationefforts(notablythroughprotectedareafinancing)andsupportsustainabledevelopmentthroughstimulatinglocal,regionalandnationaleconomies(OECD2020a).“Ahealthyandprosperousoceanisfoundationaltotheglobaleconomy,andinvestmentsinourbluefuturearemoreimportantthanevertocombatclimatechange,stopthedramaticdeclineofaquaticbiodiversity,fortifyfoodsecurityandhumanhealth,andsafeguardcoastalcommunityresilienceandlivelihoods.Bluefinanceisimportanttostrengthenresilienceofcoastalcommunitiesandoceannationstoaddressandcopewithcompoundingrisks.Togetherwithourmembercountries,ADBisinvestinginoceanhealthandstrengtheningtheenablingenvironmentforblueeconomygrowth.Thisguidanceprovidesmuch-neededstandardisationforblueinvestmentstobuildinvestorconfidenceandsupportrigorousandtransparentreporting.”IngridVanWees,VicePresident,AsianDevelopmentBank29TheGSTCcriteriafordestinationsandindustrycanbefoundhereandhere,respectively.Turnthetide:Howtofinanceasustainableoceanrecovery106CoastalandmarinetourismCasestudyBeyondTourismInnovationChallenge–Inter-AmericanDevelopmentBankInter-AmericanDevelopmentBank(IDB)’s‘BeyondTourismInnovationChallenge’(IDB2020a),incollaborationwiththeUnitedNationsWorldTourismOrganisation(WTO),wasestablishedtoidentifynewbusinessmodelsfortourismthatintroduceinnova-tionsforenvironmentalsustainabilityandworkforcedevelopmentin15CaribbeanandCentralAmericanIDBmembercountries.Tourismisparticularlyimportantinthiscontext,comprisingonaverage16.4%ofGDPinthe15selectedcountriesand17.9%ofemployment(Figure14,[IDB2020b]).TheTourismSector’scontributiontotheeconomyTotalcontributiontoEmployment%TotalcontributiontoGDP%Country20182019Country20182019Bahamas50.552.2Bahamas41.943.3Belize38.039.3Belize35.937.2Barbados30.733.4Jamaica29.731.1Jamaica31.432.8Barbados28.530.9DominicanRepublic17.417.3DominicanRepublic16.416.3Panama14.914.7Panama13.813.6Honduras12.812.2CostaRica11.812.0CostaRica11.511.7Honduras12.211.7ElSalvador11.111.6ElSalvador10.511.0Nicaragua10.310.4Nicaragua10.110.1TrinidadandTobago9.59.9Haiti9.58.4Haiti9.68.6TrinidadandTobago7.67.8Guatemala6.56.5Guatemala6.26.2Guyana4.54.7Guyana4.34.4Suriname3.62.8Suriname3.42.6DevelopedwithWorldTravelandTourismCouncildataFigure14:Tourismsector’scontributiontotheeconomyin15Caribbeanstates(IDB2020b)Turnthetide:Howtofinanceasustainableoceanrecovery107CoastalandmarinetourismTheChallengesitswithinIDB’sLab,thebank’sinnovativefinancefacilitywithagreatertoleranceforriskthantraditionaldevelopmentbanklending,financingearly-stageventures,investinginventurecapitalandofferingdebtfinancetoitsprojects.ClosedinJuly2020,theChallengesoughtoutnewbusinessmodelsfromentrepre-neurswhich—inadditiontodemonstratinginnovativeapproaches—alsodemonstratedfinancialsustainabilityandmadesomecontributiontotheircountry’seconomic,socialandenvironmentaldevelopmentinapost-Covid-19context.OnwinningtheChallenge,applicantsgainedaccesstogrants(uptoUSD500,000)andloans(uptoUSD2m)toimplementtheirinnovationsforsustainabletourism,ontheprovisionthattheyraise50%co-financing.Successfulapplicantshaveincludedprojectswithastrongblueeconomyfocus,includ-ingtheGreenFinsGlobalHub.ThisbusinessplatformisinitiallyfocusedontheDomin-icanRepublicandCostaRica,andwillprovidesupporttomarinetourismenterprises(particularlyaroundcoralreefs)tocomplywithexistingenvironmentalstandardsforsustainabletourismandmeasurablyimprovetheirsustainabilityperformance(GreenFins,2020).Elsewhere,theCaribbeanNaturalResourcesInstitute(CANARI)wassuccessfulwith‘ExperienceNariva’,anefforttotransformeco-tourismdevelopmentinTrinidadandTobago’slargestcoastalswamp,theRamsar-protectedNaviraSwamp.ExperienceNarivawillfocusondevelopingsmallandmedium-sizedenterprises(SMEs)thatbenefitlocalcommunitiesthroughcoachingandsmallgrantfinancing.TakeawayTheChallengeoffersanexampleoftherolethatdevelopmentfinancecanplayinsupportingthesustainableblueeconomy.Inthecontextoftourism,itshowshowtheuniquecircumstancespresentedbytheCovid-19pandemicofferanopportunitytoreassessbusiness-as-usualbyfinancinghigher-risk,moreinnovativeapproachesthroughco-financingtoallowforinvestmentfromprivatefinance.Turnthetide:Howtofinanceasustainableoceanrecovery108ConcludingremarksConcludingremarksThisguidanceprovidesafirst-of-itskindpracticalframeworktoconsiderfinanceforthesustainableblueeconomyacrossfivekeysectors.ItoffersavoluntaryframeworkforsustainablefinancingactivitythatbuildsontheSustainableBlueEconomyFinancePrinci-plesandsetsthestageforadditionaldevelopmentandrefinementofsustainablefinanc-ingforpractitioners,policymakersandthestakeholdersofthesustainableblueeconomy.Inadditiontoidentifyingpracticestoavoidorchallengeinareasofimprovement,theguidancealsoaimstoshinealightoncurrentbestpracticeforsustainabilityintheblueeconomy,bothinthecontextofthePrinciplesandthroughmeetingtheSDGtargets.Inthisregard,theguidancesetsoutaframeworkdesignedtoworkintandemwithestablishedsustainabilityframeworkssuchastheSDGsandencouragetheirimplemen-tationto2030.Italsoseekstosupportothersustainablefinanceframeworkscurrentlyunderdevelopment,includingtheEU’ssustainablefinancetaxonomyaswellastheTaskforceonNature-relatedFinancialDisclosures(TNFD),offeringanocean-focusedperspectiveonthefurtherdevelopmentofsustainablefinanceintothe21stcentury.“Theoceanisalifesource.Itsustainsus,stabilisestheclimate,andleadstogreaterprosperity.Ahealthyoceanisessentialforeveryone.Further,theoceanisanenormouseconomicasset,anengineoflivelihoods,transport,commerce,energyproduction.Buttoday,theocean’shealthisofftrack.Areorientationofcapital,towardinvestmentsthathelpconserveandrestoremarineecosystems,iscriticalifwearetotransformtoasustainableoceaneconomy.“TurningtheTide”representsanimportantchapterinthestoryofsustainablefinanceanditsrelationstotheocean.BuildingontheSustainableBlueEconomyFinancePrinciples,thisguidanceprovidesgranulardetailonhowthePrinciplesshouldbeinterpretedand—crucially—implemented.Insteadofbusinessasusual,thisguidanceshouldcontributetowardsatriplewinforpeople,nature,andtheeconomy,whereeffectiveoceanprotection,sustainableproductionandequitableprosperitygohandinhand.”AndrewSteer.PresidentandCEO,WorldResourcesInstituteTurnthetide:Howtofinanceasustainableoceanrecovery109ConcludingremarksItisclearfromthisguidancethatinadditiontochangingthewaysinwhichfinancialinstitutionsengagewithocean-linkedsectors,thereisanimportantroleforregulatorsandpolicymakersinensuringstandardsareinplaceindifferentmarketsworldwidetounderpinbestpractice.Theroleofthepublicsectorinsettingthetoneforwhatconsti-tutessustainabilityatalegallevelandingoverninghowfinancialinstitutionsengagethroughregulationiscriticaltothetransitiontoamoremainstreamconsiderationofsustainabilitybythefinancialsector.Whilesomemarketsleadinsustainabilityacrossdifferentsectorsandcanofferanexampleofeffectiveregulationaroundthistopic,itisalsoclearthatataglobalscale,morecoordinationisrequiredtoparameterisesustainability.Thereisarelatedneedhereforcoordinationandharmonisationofstandards,regulationsandbestpracticeataninternationallevelacrossthesustainableblueeconomytocreateaconsistentandpredictablefinancingenvironment.Despitethisneed,itisalsoimportanttorecognisethediversityandheterogeneityoftheglobaloceanandtheneedsandchallengesofdifferentcountriesandregions,understandingtheuniqueandcomplexdevelopmentchallengesfacingleastdevelopedcountries(LDCs)andsmallislanddevelopingstates(SIDS).Ensuringthatdevelopmentfinanceforsuchcountriesconsiderstheopportunitiespresentedforsustainabledevel-opmentbytheblueeconomyandaligningtheincentivesofdevelopmentfinancewithcommercialfinancewhereverpossiblewillbeofsignificantbenefittoallstakeholders.Thiscallforcoordinationandharmonisationequallyappliestofinancialinstitutionsthemselves,whoareencouragedtodomorebysharinginformationandapproachesamongpeersalongsidefosteringthemainstreamingandincreasingrigourofsustain-abilityconsiderationsacrossmarketsandstakeholders.Financialinstitutionsplayaleadingroleinshapinghowsustainabilityisimplementedacrosstheblueeconomy.Theyalsohaveakeyroletoplayinstrengtheningunderstandingamongtheirpeersofhowsustainabilityconsiderationsandapproachesareimportanttocorebusiness.Itishopedthatthisguidanceprovidesaframeworktofostersuchcoordinationandcollaboration.Turnthetide:Howtofinanceasustainableoceanrecovery110ReferencesReferences1.IntroductionFriendsofOceanAction(2020).TheOceanFinanceHandbook:IncreasingFinanceForaHealthyOcean.weforum.org/docs/WEF_FOA_The_Ocean_Finance_Handbook_April_2020.pdfAccessed03February2021.L’InstitutFrançaisdeRecherchepourl’ExploitationdelaMer[IFREMER](2004).TheDPSIRFramework.Paperpresentedatth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