Our ocean is in crisis, largely owing to harmful human activity. Over the centuries, we have polluted blue waters, created islands of waste, decimated fish and mammal populations, and eroded vast tracts of coral reef. As responsible investors, we believe that we have a critical role to play in remedying the situation. It is clear that finance must urgently be redirected into restoring, protecting and actively managing marine assets, which are among the world’s most important natural resources.
While the need to act is pressing, the opportunities to create value are also substantial. If managed sustainably, the ocean can represent a sizeable store of worth, with the capacity to provide meaningful gains to both society and business.
At BMO Global Asset Management, we believe that the only real way forward is through collaboration, and that all stakeholders – companies, investors and regulators – have a valuable part to play.
Let’s look at some of the facts
The overall value of the ocean as an asset stands at $24 trillion, according to the World Wildlife Fund (WWF). Some $2.5 trillion in goods and services flow each year from coastal and oceanic environments, and 3bn people rely on fish as their main source of animal protein.
At the same time, 8m tonnes of plastic are dumped each year into the world’s waters, and half of its coral reefs have disappeared, also according to the WWF. The ocean absorbs 30% of our CO2 emissions, which helps to swallow some of our pollution but also leads to substantial contamination of natural life.
Creating a blue economy for ocean restoration
Despite the worrying headline figures, we believe that the ocean can regenerate, and that the transition to a ‘blue’ economy can create plentiful societal and economic gains. As an example, if it were managed sustainably, the global marine harvest could increase by 13% from its current levels.
Moving to this new set of practices means fostering clean technologies, investing in renewable energy, and supporting the circular flow of materials to reduce waste. It involves restoring, protecting and maintaining marine ecosystems. Ultimately, it provides social and economic benefits for both current and future generations.
Investing in ocean health…
In practice, for investors, this means focusing our efforts on rebuilding natural assets, strengthening the ocean’s resilience, and supporting new developments and approaches that underpin the transition.
From an equity perspective, one of the most exciting aspects of investing in ocean health is just how broad the addressable investment universe is. We believe that those companies that are applying science-based targets are leading the charge in promoting change.
…and engaging for positive change
At BMO Global Asset Management, we draw on the UN’s 17 Sustainable Development Goals (SDGs) to help us with our investment approach and our engagement with businesses. The goals and their underlying targets provide a common language between us and the companies in which we invest to help drive positive change. SDG 14, to conserve and sustainably use oceans, seas and marine resources, is the most directly linked. Many others, however, are also relevant, including SDG 2 in relation to sustainable food systems, SDG 3 and SDG 6 relating to pollution in water sources, and SDG 9 and SDG 11, linking to sustainable infrastructure.
Our engagement focuses on three main areas. We explore biodiversity loss, including through industrial damage and overfishing; we examine climate change, in areas such as the financing of carbon-intensive industries, and marine transportation; and we look at pollution, and the effect of packaging and chemicals as well as waste management.
Engagement example: Vitasoy International Holdings
Demonstrating how widely we cast our net is our engagement with Vitasoy International Holdings, a food and drinks company operating within the consumer staples sector, primarily in Asia. The company, founded in 1940, sells a variety of products – notably soy milk – in 30 markets, and its revenues are linked to SDG 2.1: ending hunger and ensuring that everyone has enough safe and nutritious food. We have engaged with Vitasoy on several issues, including its supply chain management and deforestation policy, but it has been packaging – particularly consumer-facing packaging – that has concerned us in terms of ocean sustainability. Having encouraged the company to increase its use of recyclable packaging, eliminate single-use plastics, and invest in its local waste-management infrastructure, we were pleased to achieve several milestones in our engagement targets.
Vitasoy has enhanced its approach to addressing the environmental impact of packaging, including carrying out a lifecycle assessment of the plastic, glass and carton paper used in its operations in mainland China. It has also improved the packaging of some of its recyclable plastic bottles to make them lighter, which helped to reduce the company’s plastic use by 90 tonnes last year.
Overall, the company was receptive to our engagement on this issue and, with our conversations continuing, these results show what can be achieved when all parties work together.
Vitasoy is one good example of the positive changes that can result from engaging with companies to improve ocean health, and we expect to see many more as investors wake up to the importance of restoring and maintaining healthy marine environments. The ocean is vital to the health of our planet and all of us living on it, and it’s therefore crucial that investors, corporates and governments alike urgently address the ocean crisis to ensure a more sustainable future for us all.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
BMO Global Asset Management’s voting, engagement and public policy work is conducted independently of the wider BMO Financial Group. Positions taken by BMO Global Asset Management may not be representative of the views of the BMO Financial Group as a whole or of the other lines of business.
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