Risk management key to success with blue economy

DB and DC pension trustees investing in the blue economy need a thorough risk management process, warns Hymans Robertson in its report Why oceans and marine biodiversity matter as investment issues, published today. This process will help schemes understand which opportunities align best to their goals and successfully navigate the dual impacts of climate risk and nature loss, claims the leading pensions and financial services consultancy. The report highlights that opportunities for investors include renewable energy, shipping, tourism, fishing and blue technology. Each of these sectors has unique risks but also the potential to deliver significant returns both for investors and the environment. 

The report, written in partnership with the European Sustainable Investment Forum and Marine Conservation Society, points to three main steps trustees should take to understand how opportunities align to their goals:

Look at the relevant data, while following the TNFD’s guidance and LEAP framework.
Exclude companies involved in activities that harm the blue economy, such as pollution and overexploitation, by implementing a negative-screening process.
Prioritise investments in companies that emphasise transparency and traceability in their supply chains to encourage and ensure sustainable practices.

Commenting on how investors can develop a successful approach to working with the blue economy André Ranchin, Investment Consultant and Biodiversity Lead, Hymans Robertson, says:

“A healthy ocean is a powerful economic engine supporting many sectors. The ocean or, blue economy comprises economic activities including marine renewable energy, shipping, tourism, fishing, aquaculture and blue technology. The annual economic value of the blue economy is estimated at $2.5 trillion, ranking oceans as the equivalent of the seventh-largest economy by GDP, with ocean assets conservatively estimated at $24 trillion.

“Awareness of the role and importance of the oceans in combating the climate and biodiversity crises remains stubbornly low in the global investment industry. Possibly because the significant risks related to climate change and nature loss feel overwhelming. However, while there is a lot to understand, if investors take the same steps as they would with any other opportunities, they will be able to develop a strong approach that meets their investment needs and sustainability goals.”

There are three additional actions outlined in the report that investors should take when engaging with marine biodiversity: collaboration, education and seizing opportunities. Collaboration focusses on working with like-minded groups to increase understanding and drive policy change. Education should concentrate on developing an understanding of how the sector is impacted by key themes such as overexploitation or pollution. Voting power and wider engagement should be used to encourage conservation and sustainable practices. And trustees should work closely with their investment managers and portfolio companies to limit harmful impacts and identify opportunities.

Will Oulton, Chair, European Sustainable Investment Forum and Non-Executive Trustee Director, Marine Conservation Society, says:

“Climate change, biodiversity loss and pollution are three major risks to the health of our oceans. A healthy ocean is critical in tackling the climate crisis. I am pleased to have been able to work with Hymans Robertson on this paper to help Institutional investors take the initial steps to understand their risk exposures to the growing ocean economy.”

Links to the executive summary and marine biodiversity article can be found here.