Tackling climate change, protecting biodiversity and fostering inclusive economic growth will require more than $3 trillion of investments in the world’s oceans in the coming decades.
The world’s oceans help mitigate some of the most severe effects of climate change. Not only do they absorb almost 90% of global warming emissions and produce half of the oxygen we breathe,1 they also drive economic progress and job creation. Ocean-related industries generate $2.5 trillion of economic value globally and support almost 3 billion people’s livelihoods in industries including seafood, port construction and coastal tourism.2
But the economic, social and environmental benefits of oceans are at risk. Heightened levels of CO2 in the atmosphere are making the seas more acidic, threatening species, entire ecosystems and a thriving fishing economy—the ocean’s largest source of direct employment.3 Approximately 3% of global emissions can be attributed to the maritime shipping industry each year.4 In addition, rising sea levels and record-setting hurricanes or cyclones could displace coastal communities from Mumbai to Miami—possibly as many as 400 million people this century.5
Of the 17 United Nations Sustainable Development Goals, the “Life Below Water” goal has received the least amount of public money.6 But that could change with the recent UN agreement on the High Seas Treaty, a legal framework that creates protected maritime areas and sets 2030 targets to maintain the health and biodiversity of the oceans.7
“With a framework for ocean conservation now in place, there is a strong case for investors to assess opportunities in the blue economy,” says Jessica Alsford, Morgan Stanley Chief Sustainability Officer and CEO of the Institute for Sustainable Investing. “Over $3 trillion of funding is needed in the coming decades to protect our oceans so that they can continue to play a critical role in tackling climate change, curbing biodiversity loss and supporting inclusive economic growth.”
The blue economy has already attracted diverse investors, with assets in venture capital, public equity and fixed income:
Venture capital firms and other early-stage investors are especially active in circular economy solutions, such as plastic waste reduction and removal; innovative uses for seaweed and other marine life; and emerging blue technologies like tidal turbines.
In public markets, nearly 500 equity funds had an average exposure of more than 3% to the “Life Below Water” goal in 2022, with more than 100 of those funds’ exposures at 10% or more.8 While some of those funds are dedicated solely to water, others consider broader themes in which healthy oceans play a crucial role, such as the future of food production or the clean energy transition.
In the fixed-income space, blue bonds are beginning to emerge to fund sustainable ocean economy projects. For example, Morgan Stanley acted as joint bookrunner for The Export-Import Bank of Korea’s $3.5 billion bond issuance in 2022, which included a $1 billion blue tranche for sustainable marine transportation.
Meeting the UN High Seas Treaty’s commitments and supporting a sustainable blue economy will require the continued participation of public and private funds, as well as philanthropic and non-governmental organizations. The four largest areas for investment are:
Measuring Investment Opportunities in the Blue Economy
Oceans are the world’s highway: Maritime shipping carries 80% of global trade by volume and 70% by value,9 and approximately 3% of annual global greenhouse gas emissions are attributed to the industry.10 The International Maritime Organization, which regulates ship emissions, set a goal in 2018 to halve the emissions from the industry by 205011 through low-carbon fuel, ship modification and other solutions. Those efforts are expected to cost $50 billion to $70 billion annually from 2030 to 2050.12
2. Marine Solutions to Protect Ecosystems
As sea levels rise, coastal communities will need ways to protect critical infrastructure, such as roads and homes. Marine nature-based solutions, such as seagrass beds, mangroves and salt marshes, are proven to protect coastal communities from storms and flooding while also removing carbon from the atmosphere. Scaling these solutions will require approximately $1.1 trillion in investment between 2022 and 2050.13
3. Marine Renewable Energy
Oceans could unlock more opportunities to facilitate the global transition to clean energy. Fixed offshore wind farms in shallow coastal waters are currently the largest marine-based source of clean energy. However, other technologies are also emerging, such as floating offshore wind turbines in deeper waters and tools to harness wave and tidal energy. By 2040, global offshore wind sites could meet projected demand for almost all global electricity needs.14 To move toward a clean energy economy, wind farm construction will require $840 billion in capital expenditures.15
4. Sustainable Aquaculture
Approximately half of global seafood production today comes from farmed sources, or aquaculture, mostly in Asia. The other half comes from wild fish stocks, which are facing pressure from overfishing as global seafood demand continues to grow.16 Expanding aquaculture to meet this demand is a major investment opportunity, with an estimated $150 billion to $300 billion in capital expenditures needed to expand capacity in the next 10 years,17 which should be accompanied with efforts to mitigate the water pollution and labor risks inherent to the aquaculture industry. In some cases, sustainable aquaculture can also serve climate objectives as fish farms can also be co-located with new renewable energy sites and farmed seafood is a comparatively low-carbon source of protein.
Identifying key performance indicators for blue economy projects can be complex, and investors should monitor how standardization and metrics evolve. There’s no single metric to quantify impact toward ocean economy goals as there is for land-based projects that aim to reduce greenhouse gas emissions. To address this, the International Capital Markets Association is formalizing guidance for "Blue Bond" issuance,18 and an industry collective recently created the Ocean Impact Framework, which identified more than 30 KPIs across six impact themes.19 Investors should use both to help assess the climate, biodiversity and socioeconomic effects of blue economy investments alongside financial performance.
Alissa Peterson of ocean-focused venture capital firm SeaAhead contributed insights to this piece. Alissa Peterson and SeaAhead are not employed by or affiliated with Morgan Stanley or any of its affiliates.