Asset owners underinvested in marine conservation projects
Asset owners' exposure to businesses impacting marine conservation remains limited, despite growing sustainable investment interest. Green financing for land-based projects far outpaces availability of dedicated "blue" funds focused on water and marine environments.
The United Nations’ Sustainable Development Goal (SDG) 14 - Life Below Water - suffers the largest relative funding shortfall, according to the World Economic Forum. This gap stems mainly from a lack of scalable and demonstrably profitable opportunities, particularly in addressing plastic pollution.
As a result, asset owners have limited exposure to businesses and projects that could positively impact marine conservation. Even the most ecologically conscious institutions in the Asia-Pacific region, such as GIC and NZ Super, are only now beginning to support marine conservation initiatives.
However, NZ Super’s specific investment in marine ecology is limited to Genera, a bio-packaging manufacturer that produces compostable packaging and bioproducts as alternatives for plastic packaging and single-use plastic products. It is a co-investment with private equity firm Ara Partners.
“The co-investment opportunity was attractive because of Ara’s project development capabilities, along with the sustainability advantages and cost-competitiveness of Genera’s products when compared with single-use plastic packaging,” said Bacchus.
The emergence of specialist fund managers in this field is encouraging, yet even here, marine anti-pollution measures and conservation are not a core focus.
Bold Ocean Ventures (BOV) is among the growing number of fund managers investing in climate finance and sustainable food, but it currently lacks specific investments in marine conservation.
“We have seen some companies working on replacing disposable food containers and utensils; preventing future landfill and ocean pollution rather than addressing plastic already in the ocean,” Tim Agnew, general partner at BOV, told AsianInvestor.
“Like all investment opportunities, investors have to look at the business model and the revenue growth potential. Although we look at investment opportunities through an impact lens, they also have to make money for the fund or we will not be able to expand our overall ocean impact.”
Essentially – and this view is shared by others - removing plastic from our oceans is not highly profitable from a purely investment perspective. Like other impact sectors, certain areas lend themselves better to investment, while others may be more effectively supported through philanthropic efforts. In the case of plastic waste, it is widely believed that some parts of the value chain lack substantial profit potential.
SHORT-TERM VERSUS LONG-TERM
Singapore’s GIC sees the opportunity presented by emerging sustainability technologies within the broader context of heightened risk across the investment spectrum. This year, it launched a dedicated investment programme for green assets, following the early success of the Sustainability Solutions Group in its Private Equity department, which focuses on climate technology investments.
“Amidst this (market) volatility, we must seize new opportunities,” Lim Chow Kiat, chief executive officer of GIC, said in the organisation’s annual portfolio review published in July.
“One example is climate transition. We saw an opportunity to leverage our long-term, flexible capital to bridge a funding gap for climate technologies, where companies often find themselves caught between traditional buckets of capital.”
The challenge for these growth companies lies in identifying the right investors who can offer the most strategic value. This is not as straightforward as it may seem, as some ostensibly sustainable investment platforms still prioritize short-term returns over long-term impact.
“There’s still a lot of greenwashing in this space, where you have private equity funds coming in dressed up as impact,” Niall Dunne, CEO at UK-based tech company Polymateria, said in an interview with AsianInvestor.
Polymateria has developed a technology that enables many of the world’s largest companies to biodegrade their plastic products within six months.
In its early fundraising stages, the Polymateria team initially sought seed funding from friends and family.
“We also went out to meet some of the really big funds in Asia Pacific. We found that they’d invariably say ‘too early, too soon, but we can give you $50 million’. We didn’t need that much as a start-up and they didn’t write cheques that small.
“Businesses like this are best for investors that can take a really long-term view – a couple of years and then we can get to incredible growth but don’t look at it quarter-by-quarter. When you’re engaging governments or you’re building relationships or partnerships, and you’re really scaling in these markets, what you want to look at is the continuum.”