Life Below Water: World Oceans Day 2019

CIO Global Blog

12 Jun 2019

Last Saturday, 8 June, marked World Oceans Day, a day of activities around the world coordinated by The Ocean Project to raise awareness of the ocean and its vital role in the wellbeing of humanity and our planet. The ocean is also a key contributor to our economies – it is the lifeblood for industries spanning from shipping and transportation to tourism and recreation. In the following we aim to highlight which industries ocean conservancy will likely impact in the years to come.

An USD 8 billion plastic problem

According to Ocean Conservancy, plastic pollution that affects the tourism, fishing, and shipping industries carries an economic cost of at least USD 8 billion annually. Every year, about 8 million tons of plastic waste ends up in the ocean. This is equivalent to dumping an entire garbage truck of plastic into the ocean every minute.I Looking at data from the 2017 International Coastal Cleanup, a global effort to fight ocean waste, the majority of the items collected were plastic products (Fig. 1).

Fig. 1: Top 10 trash items collected on International Coastal Cleanup Day 2017

# of items collected

Source: Ocean Conservancy

Perhaps if recycling technology was more scalable and ubiquitous, less plastic would be introduced into marine ecosystems. In general, higher GDP corresponds with higher recycling ratios, though this relationship is not linear. On an absolute basis, the coastal populations of high-income countries produced the least amount of mismanaged plastic waste with the least amount of plastic entering marine ecosystems as plastic debris. Interestingly, low-income countries produced the second least amount of mismanaged plastic waste (Fig. 2). However, low-income levels tend to generate less waste in general. Middle income countries may need to improve recycling and infrastructure to keep pace with higher rates of waste generation.III

Fig. 2: Enhanced recycling practices can result in less mismanaged waste and marine plastic debris

Mismanaged plastic waste and plastic marine debris by country GNI segment, in million metric tonnes per year

Sources: Jambeck et al., UBS

Note: Data is for the top 20 countries ranked by mass of coastal (within 50km of coast) mismanaged plastic waste

Innovation in marine transportation

The International Maritime Organization (IMO) and national authorities have recently established more stringent regulations which should lead to clean tech investment. Starting in January 2020, all ocean-going ships will have to reduce their level of sulfur emissions. This can be done by using low-sulfur fuel or by using exhaust scrubbers that capture the sulfur emissions from burning high-sulfur fuel – creating a potential opportunity for equipment suppliers.

Overfishing and growing demand for food

Overfishing has led to a drastic reduction in global fish stocks, at a time when demand for food is set to increase alongside a growing population. Food production must become more efficient in order to meet rising calorie consumption, and methods such as fish farming could help to alleviate some of the potential shortages caused by overfishing. Aquaculture for example, is a practice where marine life is cultivated in controlled environments, and it appears to be gaining traction.IV

Ocean conservancy and longer term investments

CIO's longer term investment themes Waste Management and Recycling (PDF, 295 KB), Water Scarcity , and Agricultural Yield touch on key issues and technological innovations that can potentially drive change in these industries. CIO's Longer Term Investments: Renewables (PDF, 836 KB) discusses the potential to generate electricity from the oceans' tides.

Investors interested in generating a positive impact, and who indicate a preference for ocean conservancy, can be best served by targeting investments that can improve the oceans' health, directly or indirectly.

This can potentially be accomplished via impact investing, typically through private equity, private debt, or direct investments that generate intentional, measurable, and verifiable positive impact.

A deeper dive is still needed…

With oceans covering a large majority of the Earth, we have barely scratched the surface of opportunities related to ocean conservancy. Mounting concerns regarding ocean conservancy and, more broadly, climate change have the potential to influence industry and consumer behaviors globally as we attempt to navigate towards a more sustainable future. For more information please see the full report: Life Below Water: World Oceans Day 2019 (PDF, 1 MB).

Author:

Michelle Laliberte, CFA, Thematic Investment Associate, UBS Financial Services Inc. (UBS FS); Andrew Little, Sustainable and Thematic Investing Associate,UBS Financial Services Inc. (UBS FS); Alexander Stiehler, CFA, Analyst, UBS Switzerland AG; Rachel Whittaker, CFA, Analyst