Investing in blue: good for the economy… and good for the planet

People think of it primarily as meaning shipping and fisheries. Trade and transportation. And shipbuilding. But there’s more. It’s also about food and feed. Tourism, leisure, and energy. And aquaculture and carbon capture. And it’s also about all the technologies and industries that depend on and derive from these fields as well, like navigation systems, pharmaceuticals, robotics and so much more. It’s the blue economy.

Being the source behind 5% of global GDP, the sea is so much more than just ‘a big blue wobbly thing that mermaids live in,’ as Baldrick once said. There are 260m jobs just in the fisheries and aquaculture sectors, and no less than 90% of the goods that make up global trade travel by sea.

In 2019, in the EU alone, the blue economy represented more than €660bn in turnover.

Its economic importance is matched only by the enormous potential it has to address the raging environmental challenges that are threatening to end life as we know it. From protein-rich food alternatives to energy generation and carbon capture, the seas and oceans can regulate so much of what we do and act as a catalyst to slowing climate change. Over 50% of the oxygen we breathe comes from the oceans and they absorb 30% of carbon emissions.

Investing in the blue economy

To date, however, the investment potential of this massive sector has not materialised to the extent one might have expected. But that is now changing.

“I think that we’re seeing a real swell of interest in the blue economy, the beginnings of clarity and better understanding of the importance of this sector,” says Chris Gorell Barnes, founding partner at Ocean14, a venture capital firm focusing on the blue economy.

Ocean14 is a EUR 150m fund on a mission to transform the industry, making investments in businesses that are leading the way, like AION, a Norwegian company that recycles marine plastics into durable long-life plastic products like shopping baskets, food trays and storage boxes, introducing circularity into plastic use.

So, why have investors not been more forthcoming when it comes to the blue economy?

A lot has to do with expertise, the perception of risk, the complexity of the regulatory backdrop and a certain reticence of institutional investors to work with first-time teams and a sector that is still developing.

“Institutional investors often don’t have a mandate to support first-time investors. We need to address that, change risk appetites, and be more agile,” Chris argues. “Yes, it’s frustrating sometimes, but we are now laying the foundations for more engagement.”

Rita Sousa of Lisbon-based Faber Ventures, another specialised venture capital firm, highlights the added layers of complexity that have hindered investments:

“It’s often difficult for generalist VC funds to understand the market dynamics and the regulatory constraints that companies could face, hindering the pace of growth and go-to-market speed. And there’s an additional layer of perceived risk in technology development because of the maritime environment.”

Faber are out to change this, investing in early-stage, deep-tech companies in the Iberian Peninsula: “I think innovative, deep-tech impact-driven entrepreneurs are the key ingredient, the core engine of the transformation that we need to see in this sector.”

Deepsea, a Greek start-up based in Athens, is one such innovative business linking deep-tech to the oceans. The company brings together big data, artificial intelligence and the shipping industry in order to improve performance and achieve efficiencies and savings. Using sensors on the ships and cloud technology, it can optimise maintenance, deal with fouling more effectively and help vessels adapt to the conditions around them, making them leaner, cleaner and ultimately greener.

As interest and urgency gather around the sector, the first generation of specialised blue economy venture capital and private equity funds will act as a catalyst to attract more financing, and as these businesses grow, and we see the first real success stories scale, the flag will indeed be flying higher.

“Blue start-ups can tackle huge problems like the food challenge, the energy challenge, ocean health and waste management… These are key areas closely linked to blue economy that can become valuable. There is low competition in many of these fields and when the first unicorns start coming in the innovation ecosystem, that will draw in more institutional investors,” she adds.

Laying out the plan to attract more capital into this space, Rita also refers to improved clarity on the regulatory side: “We expect that the necessary regulatory frameworks will be in place quickly so that market forces are aligned to enable these start-ups to bring their solutions to market faster.”

Chris is also upbeat about the potential: “There is incredible innovation in Europe. We’re very fortunate in this respect. This innovation right here can have a transformative effect in geographies that need it most, like plastics in developing countries for example. Europe is underfunded, but there are huge opportunities here.”

Go blue, be green

All these opportunities can have a huge impact on our collective efforts to tackle climate change and boost environmental sustainability. Effectively drawing in more institutional capital will play a key role in lifting these innovative entrepreneurs and their ideas into viable businesses, but also in attracting other investors and feeding this growing industry with fresh financing.

“We need to get institutional capital involved if we really want to solve the problems around climate change and environmental sustainability,” says Chris. “We live in a capitalist world, so we need a capital answer. Regulation should push institutional capital more towards impact investing, to really transform and improve the blue economy.”

Conscious of the challenge, the European Commission developed a dedicated #BlueInvest policy back in 2020, which included a EUR 75m pilot investment plan managed by the EIF. That has since been invested, including in Ocean14 and Faber, and a new round of EUR 500m financing has been made available under the new InvestEU programme. When that amount is fully deployed, the aim is to achieve the mobilisation of between EUR 1bn and EUR 1.5bn, to be invested in blue economy businesses.

“Public money plays a very important role,” says Miguel Heredia, of Portuguese Growth Partners, a private equity firm also active in this space. “Raising capital can be difficult, but when we say that the EIF is an anchor investor, that immediately puts other investors in a more relaxed conversation mode. At the same time, with ESG considerations growing, there are large institutional investors out there that want to have products like ours in their sustainability portfolio.”

It’s not all technology… or is it?

It’s clear that we are seeing increased interest in the blue economy, both in terms of public policy and in terms of investments. Improvements in the regulatory framework, better monitoring, data collection and analysis is making everything more visible and helping to bridge information gaps and reduce perceived risk. Technology is creating opportunities. And finally, institutional capital is warming up to this field. That’s the economy part.

But as we laud the power and potential of this field to constitute a solution to environmental sustainability, it’s worth noting that in the eyes of some, the best solution is nature itself: “Ultimately, what’s going to save us is the best technology on the planet, which is nature itself. Seagroves, kelp, biodiversity…No technology is ever going to be as powerful,” says Chris.

“Technology has a role to play, yes. Artificial intelligence, data and technology are all useful, but not necessarily the silver bullet. It’s the circular and regenerative character of nature that will make the difference.” You could call that the blue part.

As tackling the climate crisis head-on takes center stage across the global political arena, we need a vast array of solutions to succeed in making a difference. The blue economy and the oceans are as much a source of economic wealth as they are a source of potential solutions that will edge us closer to environmental sustainability. The ingredients are there and this is starting to look like a very exciting area full of opportunities, for both the economy and the planet.