While it would be hugely premature to suggest the climate crisis has been solved, there at least now appears to be an emerging path to reducing carbon emissions and containing global warming. The same, however, cannot be said for the looming crisis in the oceans, which are also vulnerable to climate change, alongside overfishing, habitat destruction and pollution.
Close to three-quarters (71%) of the Earth’s surface is ocean. The World Wildlife Fund “conservatively” estimates the economic value of global ocean assets is more than $24trn (£19.2trn), while “an annual value of goods and services” of $2.5trn would be enough to rank it as the seventh-largest economy in the world by GDP.
This ‘blue economy’ contributes $1.5trn a year to the global economy, with billions of people depending on it for their livelihoods.
Just as humanity has neglected the land, it has neglected the oceans, with the public face of this being plastics pollution.
Global plastic production has exploded from about 1.5 million metric tonnes in 1950 to 368 million in 2019 and, reports Sarasin, an estimated eight million tonnes of plastics end up in our oceans every year – equating to 80% of all marine debris.
While campaigners have often focused on plastic bottles, the real problem is microplastics.
“The biggest source of plastics is paint,” points out MJ Lytle, chief executive at Tabula Investment Management. “Shipping companies put it on their hulls and it is on drilling platforms too. Plastic is a petrochemical and, while a bottle can be picked up and removed, this ‘plastic soup’ is incredibly hard to take out of the ocean.”
Adds Susana Coutinho, research director at ESG advisory and portfolio analytics specialist MainStreet Partners: “Some 92% of plastic pollution found on the ocean’s surface is classified as ‘microplastic’ – that is, shorter than five millimetres in length. This is because once plastic enters our waters it rarely leaves, breaking down over time until it is small enough for marine life to mistake it as food. As a result, it has been reported that plastic is found in the guts of around one-third of the UK’s caught fish.”
Plastics are not the only problem, though. “Overfishing is another factor threatening the vibrancy of ocean life – and one that is difficult to control,” Coutinho says. “The main reason for this is the legal status of the ocean as a ‘public good’, which means it is very difficult to restrict. Each individual vessel is incentivised to catch as many fish as it can because if it doesn’t, the next boat will.”
Sea life also moves around. “Even in areas where quotas and boundaries are in place, they are very tough to enforce and so have little impact,” adds Coutinho. “Consumption of fish has also increased over the past three decades – up 122% between 1990 and 2018.”
The world’s oceans are also firmly on the frontline of climate change. To quote the World Wildlife Fund: “The oceans regulate the global climate – they mediate temperature and drive the weather, determining rainfall, droughts and floods. They are also the world’s largest store of carbon, where an estimated 83% of the global carbon cycle is circulated through marine waters. In the last 200 years, the oceans have absorbed a third of the CO2 produced by human activities and 90% of the extra heat trapped by the rising concentration of greenhouse gases.
“As the climate responds to decades of increasing carbon emissions, the store of energy and heat from the atmosphere builds up in the ocean. If we reach a tipping point, we will likely see more extreme weather events, changing ocean currents, rising sea levels and temperatures, and melting of sea ice and ice sheets – all of which aggravate the negative impacts of overfishing, illegal fishing, pollution and habitat degradation.”
Plastics is a growing priority for ESG-aware investors. In 2015, the European Commission adopted an ‘Action Plan for a Circular Economy’ and, two years later, set goals for all plastic packaging to be recyclable by 2030 and for more than half of plastics to be recycled. For their part, investment managers are increasingly interrogating companies on their plastics footprint.
According to Tabula’s Lytle, the data does not yet exist to hold corporates to account on plastics. Just as this kind of information has built up with carbon disclosure, however, it is likely to build momentum as regulators and investment managers demand more of companies. More recently, the Minderoo Foundation has launched its Plastic Waste Makers index, which names and shames those companies that produce single-use plastic waste.
The index reveals just 20 companies are responsible for producing more than half of all the single-use plastic waste in the world – and they are not necessarily the obvious suspects. So-called ‘fast-moving consumer goods’ companies barely feature, while oil majors are significant plastics polluters. The index identifies ExxonMobil as the greatest single-use plastic waste polluter in the world, followed by chemical company Dow and China’s oil and gas enterprise Sinopec. In terms of countries, Australia is the most significant culprit – with 59kg of single-use plastic waste produced per person – while the US comes in at 53kg and South Korea and the UK 44kg each.
Companies are taking steps to address the problem. Lego had come under fire for its plastics consumption but has now developed a new prototype block that is fabricated from polyethylene terephthalate or ‘PET’ plastic from discarded bottles. And Adidas is using waste plastic to manufacture goods through its recent collaboration with Parley, which uses ‘ocean-bound plastic’ to make trainers and swimwear. That said, change is perhaps easier to effect among consumer goods companies with reputations to lose than it is for oil majors already considered ‘dirty’ by many investors.
MainStreet Partners’ Coutinho notes there are plenty of exciting businesses coming up with solutions, adding: “Companies such as Recycleye are using tech to tackle the inefficiencies of sorting waste. Founded in 2019, so far it has caught the eye – and backing – of big corporations like Microsoft and Nvidia, suggesting the prospects for applications of the technology are strong.” She also highlights companies such as Oatly and Beyond Meat, which are producing alternatives to animal and fish-derived food and drink.
In fixed income, meanwhile, ‘blue bonds’ have been created to help fund the conservation of ocean ecosystems. The first sovereign blue bond was issued by The Republic of Seychelles in 2018 and raised $15m, while Morgan Stanley raised $10m-worth of blue-bond assets in the same year.
Both were designed with the help of the World Bank although blue bond issuance remains some way behind green bond issuance. Total blue bond issuance to date is approximately $1.2bn, compared with more than $1trn for green bonds.
Governments, regulators and corporates are still some way away from “an executable plan on ocean health”, as Lytle puts it. “There are specific companies with great scientific know-how,” he adds, “but these can only ever deal with 10% of the problem. The key to changing the outcome is to tackle the ‘unsexy’ 90% of companies that are currently not doing anything.”
Tackling the problem of the oceans is likely to prove every bit as vast as tackling carbon emissions but all the key players – from business to governments, regulators to investors of every type – are further behind in developing a coherent plan.
Disclosure is improving, but the ecosystem of the ocean remains poorly understood. The world will need to become as exercised about the oceans as it has about carbon emissions but, if it does, a genuine sea-change can occur.