Investing To Protect The Oceans

Through the explosive rise of environmental, social, and governance (ESG) investing in recent years, the “E” in ESG has been almost entirely defined by efforts to address climate and terrestrial problems. Investors wanting to leverage their capital to improve the health of the world’s oceans haven’t had an abundance of options.

But that is finally beginning to change. Some public investments such as new so-called blue bonds—the blue referring to oceans and waterways—and stocks of companies with innovative ocean-protective policies are liquid entry points for investors. Meanwhile, direct private investment options have been opening up for wealthy folks who can tolerate investment lockup periods and high minimum investments.

“ESG and impact investments directly addressing oceans are taking time to develop,” says Justina Lai, chief impact officer at Wetherby Asset Management, a San Francisco wealth management firm specializing in ESG. “But it’s an area that has garnered more interest in the past two or three years as awareness grows.”

Blue Bonds

Among the newest options are blue bonds, whose proceeds are used to fund ocean-related projects aimed at preserving and protecting the environment.

The first issuance was in 2018 by the Republic of the Seychelles to fund sustainable fisheries. More recently, Morgan Stanley underwrote the World Bank’s $10 million issuance of 30-year blue bonds.

“Our goal is to connect capital with solutions, to drive impact around issues of plastic waste,” says Matthew Slovik, head of global sustainable finance for Morgan Stanley, which in 2019 resolved to reduce and prevent 50 million metric tons of plastic waste by 2030.

Critical to the acceleration of change is making impact and ESG investments accessible to average investors. Morgan Stanley is doing its part by offering low minimum investment—$10,000—ESG portfolios that include ocean-supportive investments, Slovik says.

Private Investments

Opportunities are broadest in the private investing arena, where pioneering venture, private equity, and debt funds are channelling capital into companies with innovative ideas for addressing marine challenges.

Among them is Closed Loop Partners, a New York investment firm committed to helping build a circular economy in which products are reused and waste is eliminated before it can reach the oceans. For example, its Closed Loop Venture Fund invests in a Chilean start-up called Algramo, which creates refill stations for household products such as detergent, condiments, rice, and other staples.

Circulate Capital, a Singapore-based private investment company, similarly focuses on plastic reduction in nations including India, the Philippines, Thailand, Vietnam, and Indonesia. Coca-Cola, PepsiCo, and Unilever are among investors in the Circulate Capital Ocean Fund, among whose underlying investments are Ricron Panels, a Gujarat, India-based recycler of plastic waste into materials for furniture and building construction, and Tridi Oasis, an Indonesian converter of PET (polyethylene terephthalate) bottles into flakes used in packaging.

There’s great potential for growth for innovators in the blue economy, says Mark Huang, co-founder and managing director of SeaAhead, which provides a start-up platform for blue innovators and last year launched the Blue Angel Investment Group to connect investors with promising start-ups. The Paris- based Organisation for Economic Cooperation and Development estimates the blue economy will double to $3 trillion by 2030.

Blue Angel’s debut was met with the challenging circumstances created by Covid-19, but by February this year had already doubled its entire 2020 capital. Among its investments: Beta Hatch, a young Seattle firm that creates feed for poultry out of mealworms, replacing the typical feed made from ground fish—a product leading to overfishing in the oceans, Huang says.

As the war against Hamas dragged into 2024, there were worries here that investment would dry up in Israel’s globally important technology sector, as much of the world became angry against the casualties in Gaza and recoiled at the unstable security situation.

In fact, a new survey found investment into Israeli technology startups grew 28% last year to $10.6 billion. The influx buoyed Israel’s economy and helped it maintain a war footing on several battlefronts.

The increase marks a turnaround for Israeli startups, which had experienced a decline in investments in 2023 to $8.3 billion, a drop blamed in part on an effort to overhaul the country’s judicial system and the initial shock of the Hamas-led Oct. 7, 2023 attack.

Tech investment in Israel remains depressed from years past. It is still just a third of the almost $30 billion in private investments raised in 2021, a peak after which Israel followed the U.S. into a funding market downturn.

Any increase in Israeli technology investment defied expectations though. The sector is responsible for 20% of Israel’s gross domestic product and about 10% of employment. It contributed directly to 2.2% of GDP growth in the first three quarters of the year, according to Startup Nation Central—without which Israel would have been on a negative growth trend, it said.

“If you asked me a year before if I expected those numbers, I wouldn’t have,” said Avi Hasson, head of Startup Nation Central, the Tel Aviv-based nonprofit that tracks tech investments and released the investment survey.

Israel’s tech sector is among the world’s largest technology hubs, especially for startups. It has remained one of the most stable parts of the Israeli economy during the 15-month long war, which has taxed the economy and slashed expectations for growth to a mere 0.5% in 2024.

Industry investors and analysts say the war stifled what could have been even stronger growth. The survey didn’t break out how much of 2024’s investment came from foreign sources and local funders.

“We have an extremely innovative and dynamic high tech sector which is still holding on,” said Karnit Flug, a former governor of the Bank of Israel and now a senior fellow at the Jerusalem-based Israel Democracy Institute, a think tank. “It has recovered somewhat since the start of the war, but not as much as one would hope.”

At the war’s outset, tens of thousands of Israel’s nearly 400,000 tech employees were called into reserve service and companies scrambled to realign operations as rockets from Gaza and Lebanon pounded the country. Even as operations normalized, foreign airlines overwhelmingly cut service to Israel, spooking investors and making it harder for Israelis to reach their customers abroad.

An explosion in negative global sentiment toward Israel introduced a new form of risk in doing business with Israeli companies. Global ratings firms lowered Israel’s credit rating over uncertainty caused by the war.

Israel’s government flooded money into the economy to stabilize it shortly after war broke out in October 2023. That expansionary fiscal policy, economists say, stemmed what was an initial economic contraction in the war’s first quarter and helped Israel regain its footing, but is now resulting in expected tax increases to foot the bill.

The 2024 boost was led by investments into Israeli cybersecurity companies, which captured about 40% of all private capital raised, despite representing only 7% of Israeli tech companies. Many of Israel’s tech workers have served in advanced military-technology units, where they can gain experience building products. Israeli tech products are sometimes tested on the battlefield. These factors have led to its cybersecurity companies being dominant in the global market, industry experts said.

The number of Israeli defense-tech companies active throughout 2024 doubled, although they contributed to a much smaller percentage of the overall growth in investments. This included some startups which pivoted to the area amid a surge in global demand spurred by the war in Ukraine and at home in Israel. Funding raised by Israeli defense-tech companies grew to $165 million in 2024, from $19 million the previous year.

“The fact that things are literally battlefield proven, and both the understanding of the customer as well as the ability to put it into use and to accelerate the progress of those technologies, is something that is unique to Israel,” said Hasson.

Investing To Protect The Oceans

Why investing in ‘blue-bonds’ could pay.

The 28% increase buoyed the country as it battled on several fronts but investment remains down from 2021