A renewed chance to address Climate Change and the Ocean

Torsten Thiele Senior Visiting Fellow of the Institute of Global Affairs at the School of Public Policy, LSE

The wholesale integration of climate, biodiversity and ocean issues into the global financial architecture to align with nature and sustainability is long overdue. Disruptions caused by COVID-19, along with increased awareness of both the climate and the biodiversity threat to the ocean and human livelihoods, must now urgently be translated into urgent effective action. 2021 provides the opportunity for this critical realignment, particularly as climate change is back on the agenda of all major governments.

We have been seeing a number of hopeful signs in recent weeks: • Major economies, governments, subnational actors and corporations have committed to net zero 2050 goals and are developing credible de-carbonization strategies; • UNFCCC COP 21 looks set to deliver a solid global implementation framework, with the U.S. likely to rejoin the Paris Agreement; • The EU, the UK and others are targeting their COVID recovery funding with a clear “greening vision”; • Regulators are clarifying common approaches to climate risk, with specific guidelines and a roadmap to mandatory disclosures for companies by the Task Force on Climate Related

Financial Disclosures (TCFD); • The Federal Reserve, the world’s global central bank, is moving closer to joining the Network of Central

Banks and Supervisors for Greening the Financial System (NGFS), which can help shape global financial markets’ behaviour; • The European taxonomy of environmentally sustainable economic activities – a set of technical screening criteria for economic activities that can make

a substantial contribution to climate change mitigation or adaptation, while avoiding significant harm to the four other environmental objectives – provide a comprehensive framing to align investment strategies and capital markets to deliver sustainable finance; • The planned adoption of a post2020 global biodiversity framework by the Conference of the Parties to the Convention on Biological

Diversity in 2021, together with adequate resource mobilisation, can offer a pathway to more effective support towards key measures that seek to safeguard nature and the human livelihoods that depend on it; • Private sector actors are increasingly taking the lead on climate and biodiversity commitments; • The commitment by the negotiators to conclude a workable UN

Agreement on Biodiversity Beyond

National Jurisdiction under United

Nations Convention of the Law of the Sea in 2021 will deliver the opportunity to protect the

international ocean and create conditions for sustainable marine development; • The Green Climate Fund and the

International Development Finance

Club have formed a strategic alliance to help realise the potential of public development banks in financing the green and climate-resilient transition; • The recent T20 Communique clearly identifies critical pathways for a circular economy and in proposal 24 calls on the G20 to protect, conserve, and restore biodiversity

The G20 countries are the key international group that can provide leadership in this area, with 85% of global GDP and some 80% of the global greenhouse gas emissions. By supporting the international UN climate process with complementary political, economic and technological ambition to rapidly decarbonise and reduce emissions to net zero by 2050, there is still a chance to halt global temperature increases. This is provided that the world’s nations fully take account of the climate-biodiversityocean nexus as they transition to circular and sustainable economies.

Total infrastructure capital around the world is expected to double in the next 15 years, so the format through which investment takes place will have a profound influence on “global commons”, such as the climate and the ocean. The international financial institutions have a critical role to play in ensuring the quality and sustainability of that investment. Multilateral development banks are well positioned to crowd in the required private resources. They need to develop contingent public finance facilities, launch support operations and system-wide

insurance instruments to facilitate fast disbursement, effective implementation and solid impact assessment.

The natural capital of the ocean is significant but not well quantified. Ocean ecosystem services are under threat from climate change, pollution and other stressors. The concept of ocean risk puts an economic perspective on these changes and can help develop viable approaches to protect the blue natural capital. This includes new funds to protect coastal and marine systems, such as coral reefs and mangroves. The UN Sustainable Development Goal (SDG 14) expressly aims to “conserve oceans and seas”. Moreover, the Paris Agreement’s Preamble notes the importance of ensuring the integrity of all ecosystems, including the ocean, with the proposed funding mechanisms for mitigation and adaptation applying to ocean and coastal solutions. Ultimately, public and blended finance is required to deliver investment into nature-based solutions.

The development of a blue economy framework can provide the necessary tools to identify sustainable ocean activities and facilitate their financing. A better understanding of concentrations of ocean-related assets and exposure to risk facilitates informed capital allocation, better decision-making and encourages forward-looking information provision to owners, other stakeholders and regulators. The blue natural capital approach such as applied by the International Union for Conservation of Nature (IUCN) draws on nature-based solutions, which are then integrated into investment streams that support clean energy and water, plus data and communications services and local financing opportunities. New ocean financing tools such as blue bonds can help to deliver the financial resources required. In order for innovative finance mechanisms needed for coastal habitat protection to emerge at scale, they need to be consistent with the wider efforts on sustainable finance. The Sustainable Blue Economy Finance Principles, now hosted at UNEP-FI and the Climate Bond Initiative’s Adaptation and Resilience Principles, can provide specific guidance to funders on which projects and assets are compatible with a climate resilient economy. Marine habitats such as mangroves, salt marshes and seagrasses are relevant carbon sinks and opportunities exist to update blue carbon accounting based on science such as by adding macro algae, deep-water seagrasses and addressing carbon cycling in blue carbon ecosystems.

Biodiversity is the foundation of life and of sustainable development. The G20 countries must promote ocean

The development of a blue economy framework can be used to provide the tools to identify sustainable ocean activities and facilitate their financing.

science and technology, operationalise effective marine protected areas, mainstream ecosystem-based adaptation and nature-based solutions for climate change mitigation, and facilitate the economic valuation of blue carbon under the UNFCCC. G20 countries must take regulatory and fiscal measures in order to rapidly reduce industrial and agricultural sources of pollution, including safe use of plastics and chemicals. Furthermore, bio-based alternatives and circular business models require research and funding support. A possible G20 Oceans Fund or an Ocean Sustainability Bank with the ability to issue blue bonds could therefore accelerate urgently needed cooperation to preserve marine biodiversity, ocean and human health. ◆

Torsten Thiele is a Visiting Fellow in the Institute of Global Affairs at the London School of Economics. His research areas are ocean governance and blue finance. Founder of the Global Ocean Trust and Senior Research Associate at lASS, Torsten Thiele had a long career in infrastructure finance in the City of London, where he was Head of Telecom Project Finance for Investec Bank plc till 2013. He holds graduate degrees in economics and in law from Bonn University, an MPhil from the University of Cambridge and an MPA from the Harvard Kennedy School. He returned to Harvard University as a 2014 Advanced Leadership Fellow. Torsten Thiele is also active on a number of advisory boards, including DOSI and EU ocean projects SOPHIE and iAtlantic.