Impact Investing Emerges as Priority

UK-based asset manager Schroders has been named as one of the “best-in-class” for this type of investment strategy. 

Investors’ management, measurement and monitoring of impact investing strategies has been steadily improving.  This is according to intelligence provider BlueMark’s fifth annual ‘Making the Mark’ report, which assessed the best practices and trends of impact investment strategies worth a total US$234 billion in combined assets – equivalent to 20% of…

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A Virtuous and Self-sustaining Cycle

Early-stage investors must focus on the ocean economy to make waves in the climate race, according to Ed Phillips, Investment Director at Future Planet Capital. 

As we move into the summer months, we can expect headlines to be filled with record-breaking temperatures and unprecedented wildfires driven by climate change. While what happens on land will make our changing climate visceral to many, the damage happening to our oceans may continue to go unheeded and unnoticed.

This year’s World Oceans Day was therefore a helpful moment to reflect on the need for action and to put our oceans higher up the climate finance agenda, not only to mitigate the damage happening to this vast and important resource, but to also capitalise on the solutions it offers.

The ocean, which covers more than 70% of our planet, is the natural engine room when it comes to climate management. It produces 50% of the world’s oxygen, absorbs 30% of global carbon dioxide emissions, and captures 90% of the excess heat produced by these emissions.

Beyond these capabilities that must be protected, we should also be turning more to the ocean’s additional climate potential. Ocean-based climate solutions, such as ocean-based renewable energy and utilising low-carbon food from the ocean, hold the potential to reduce the emissions gap by up to 35% on a 1.5ºC pathway.

The economic argument is also strong. The global ocean economy is estimated to sit at around US$1.5 trillion per year, making it the seventh-largest economy in the world. With the right expertise, motivated investors could access ocean assets that total out at an estimated US$24 trillion!

Despite all this, what has been labelled the world’s greatest ally against climate change, still finds itself snubbed when it comes to investment. The ocean receives less than 1% of all climate finance, and the UN’s fourteenth Sustainable Development Goal – Life Below Water – remains the most underfunded of all.

Clear blue future

As headlines will remind us, there is a clear imperative to unlock the potential of our ocean if we are to take timely strides against climate change. But vast amounts of capital are still required to achieve this. So, how do we get more capital floating into the ocean economy?

Part of the solution might seem quite simple – putting the ocean at the forefront of the global climate change regime. Given its known importance – and potential – you’d be forgiven for thinking this was already the case. Not

Global Blended Finance Hits US$15 Billion

Climate-focused transactions are also on the rise, but private investors’ efforts have been limited by data availability. 

Catalytic capital flows to de-risk projects centred around sustainable agriculture, renewable energy, and health and education projects across emerging markets (EMs) have increased in 2023 after a ten-year lull. 

According to blended finance network Convergence’s latest State of Blended Finance report, the market rebounded to a five-year high of US$15 billion in 2023 after ten years of consistently low volumes, with multilateral development banks (MDBs) and development finance institutions (DFIs) investing greater sums. 

Convergence recorded 1,123 blended finance transactions totalling US$213 billion, outstripping the yearly 85 deals average of the past decade. Around 40% of these deals were valued at over US$100 billion in 2023, compared to 17% in 2022 and 28% in 2021. 

“Climate has become an even stronger focus [within blended finance], with financing flows increasing by over 100% in the last year and around half of these climate-focused deals worth US$100 million or more,” confirmed Convergence Manager Nick Zelenczuk during a webinar that launched the report. 

Within that, the energy sector was the most active segment, accounting for nearly a third of total deal activity and US$101 billion of capital flows. 

“Much of this investment targets renewable energy development,” the report mentioned. “Over the last year, 91% of blended transactions in the sector channelled financing to renewable energy, with nearly US$10 billion going towards solar projects.” 

In 2022, Convergence had warned that climate-oriented blended finance transactions were on the decline, having dipped 60% from US$36.5 billion in 2016-18 to US$14 billion in 2019-21. 

In its 2023 climate-focused blended finance report, the network highlighted an uptick in climate-focused blended finance, with large transactions such as the US$1.11 billion SDG Loan Fund devised by Allianz Global Investors and the Dutch Entrepreneurial Development Bank. 

Developing countries currently face an estimated US$4 trillion annual investment gap to meet the UN Sustainable Development Goals (SDGs). Blended finance is seen as a vital tool to contribute the capital flows needed to fulfil both these and the Paris Agreement goals. 

Cards on the table 

Despite the significant