The Blue Economy is an increasingly relevant concept on the global stage, as it recognises the vast potential of the oceans to promote sustainable economic growth while preserving the health of marine ecosystems. Oceans cover more than 70% of the Earth’s surface and play a crucial role in climate regulation, biodiversity, and oxygen production, being essential for life on Earth. Therefore, analysing and investing in sectors related to the Blue Economy is key to ensuring that its development is both responsible and sustainable.
In a recent interview with our visiting analyst Alex Pujadas, we delved into what the Blue Economy encompasses, its positive impact, key sectors for impact investment, and the challenges it faces in maximising its potential without compromising the health of the oceans. Below, we share some of the key points from this conversation.
What is the Blue Economy?
The Blue Economy has various definitions; indeed, each organisation or institution defines it in a different way. For instance, the European Commission defines it as “all economic activities related to oceans, seas and coasts”, while the World Bank defines it as “the sustainable use of ocean resources for economic growth, improved livelihoods and jobs, while preserving the health of ocean ecosystems”.
At Ship2B Ventures, after conducting extensive research into all sectors of the Blue Economy, the players involved, and the impact generated by each sector on the ocean, we define it as “the set of economic activities that directly or indirectly exploit marine resources, activities that use it as a tool, and activities that conserve and restore its resources”. The outcome of this study is our Impact Investment Thesis on the Blue Economy.
Alex Pujadas, visiting analyst at Ship2B Ventures
What sectors are included?
While it is true that the definition of the Blue Economy shows some disparity, there is greater consensus on the sectors it includes. At Ship2B Ventures, we align with this consensus and consider that it primarily encompasses these 10 key sectors: fishing, aquaculture, coastal and ocean tourism, maritime transport and ports, the generation of marine renewable energy (we distinguish between energy generated directly by water forces, such as tidal and wave energy, and energy generated by external factors with installations in the ocean, such as offshore wind and solar), marine biotechnology, environmental protection and regeneration, shipbuilding and maintenance, water management, and ocean observation.
In addition to considering these 10 sectors, at Ship2B Ventures we classify them into four distinct value chains:
- Direct exploitation of living ocean resources: fishing, aquaculture, and marine biotechnology.
- Direct exploitation of non-living ocean resources: water management and the generation of marine renewable energy (tidal and wave energy).
- Indirect exploitation of ocean resources: generation of marine renewable energy (wind and solar), coastal and ocean tourism, maritime transport and ports, and shipbuilding and maintenance.
- Conservation and restoration of ocean resources: ocean observation and environmental protection and regeneration.
From our investment thesis, we focus on the sectors included in value chains 1 and 4, as they have a greater impact on ocean resources and, at the same time, are the sectors most dependent on the health of those resources.
What is its potential for generating a positive impact?
To understand the main positive impact of the Blue Economy, it is important first to understand the role the ocean plays in the environment, climate change mitigation, and our survival as a species. As a matter of fact, the ocean covers more than 70% of the Earth’s surface and is key to maintaining the planet’s ecological balance. Ocean systems range from the surface zone, known as the epipelagic zone, where sunlight enables photosynthesis that serves as the base of complex marine food chains, to the deeper zones, such as the bathypelagic and abyssopelagic. According to Project Drawdown, the ocean absorbs up to 17% of CO2 emissions and more than 90% of the excess heat generated by human activity, acting as a crucial carbon sink to mitigate climate change. It also produces around 70% of the oxygen we breathe.
The main positive impact of the Blue Economy is to preserve and restore ocean ecosystems so that we can continue to benefit from them. This is achieved through innovations such as: promoting sustainable aquaculture techniques that minimise environmental impact and improve resource use efficiency; protecting marine areas, which includes creating exclusion zones where human activities are limited or prohibited to recover biodiversity; and directly restoring ecosystems with nature-based solutions (NBS), such as mangrove reforestation and coral reef reconstruction, among many others.
What is the state of the Blue Economy investment market?
In the past 5 years, investment in the Blue Economy has grown by 298%, reaching $3 billion in 2023. Despite this, between 2022 and 2023, investments decreased by 32%, a figure which, although significant, is relatively small compared to the declines experienced by other sectors such as startups in general or Climate Tech. This indicates a phase of consolidation for the Blue Economy after a period of rapid expansion.
Regarding the geographical distribution of these investments, the US and Europe have led the sector, each investing $1.3 billion in 2023. Within the Blue Economy, the sectors that have attracted the most interest from investors are aquaculture, blue biotechnology, and technologies aimed at ocean observation and protection.
What challenges does the Blue Economy face?
We have identified several challenges that can be grouped into two main categories: the socio-demographic challenge and the climate change challenge.
Currently, more than 3 billion people rely on the sea as their primary source of protein. With the global population projected to reach 10 billion by 2050, the demand for these marine resources will continue to grow. As a result, this increase in demand intensifies pressures on the oceans, exacerbating the scarcity of natural resources and threatening marine species, a third of which are already overexploited. The situation is further worsened by pollution and the effects of climate change, which are seriously threatening both marine species and their ecosystems. If current fishing practices continue, it is estimated that by 2050 there could be more plastic than fish in the ocean.
The second major challenge is climate change, which involves the need to protect and restore marine ecosystems to preserve the ocean as a carbon sink. Climate change is causing physical and chemical changes in the oceans. Physical changes include water warming, rising sea levels, and marine heatwaves, all of which affect nutrient distribution and primary productivity, with a negative impact on fish stocks and marine ecosystems. Chemically, ocean acidification, deoxygenation, and changes in nutrient availability complicate marine life and threaten biodiversity. Additionally, bottom trawling, one of the most destructive practices for marine biodiversity, is also a significant source of greenhouse gas emissions, contributing approximately 1% of the global annual total.
Is there a risk of greenwashing?
As in all industries with the potential to generate a positive environmental impact, the Blue Economy is not exempt from the risk of greenwashing. This risk is particularly high due to the lack of transparency often characterising operations in these sectors. Manipulation or falsification of data, such as the amount of marine species accidentally caught, is still a common practice. Additionally, promoting products as sustainable through labels that do not allow clear traceability of the origin and capture methods of fish is another form of greenwashing that undermines consumer trust.
Another critical aspect is that some companies dedicated to marine ecosystem restoration may exaggerate the positive impact of their efforts to gain economic benefits, without their actions truly reflecting the magnitude of the change they promote. An additional example of greenwashing in the Blue Economy could be the installation of marine renewable energy, such as offshore wind farms, which, although they produce clean energy, can severely damage the seabed and affect local ecosystems. These companies may highlight the environmental benefits of their renewable energy without disclosing or minimising the destructive impact of the installation.
To address this challenge, it is crucial to improve regulation, transparency, and traceability of operations, foster technological innovations, and engage local communities. Only with proper oversight and education on sustainable practices can we ensure that the Blue Economy is truly beneficial for the environment.