swiss impact investment initiative the 4 impact workshop...

SWISS IMPACT INVESTMENT INITIATIVE

The 4th Impact Workshop May 15 2019, 3.00 pm to 5.30 pm, Mövenpick Hotel

1

Welcome All,

The Swiss Impact Initiative ambition this year is to make a meaningful contribution to SDG 14. The financing of SDG 14 has been so far slow moving. This needs to be corrected.

The protection of ocean is crucial to the survival of mankind. 70% of the oxygen we breathe comes from marine life; 3 billion people rely on a healthy ocean for food & work. The blue economy in itself is set to rank 7th amongst the largest economies of the world by 2030 with an estimated annual revenue of 3 trillion.

Figures extracted from OECD & WWF

The prerequisite is a sustainable economy based on a sustainable ocean.

It is therefore the right time to mobilize research and innovation to scale-up technology and find innovative bankable solutions for ocean protection.

The blue economy spans several industries:

Oil & gas, fishing, shipping and tourism are large contributors but they need a drastic change of course to adapt to the circular economy and become sustainable.

Marine energy, marine conservation, marine biodiversity and aquaculture, marine de-pollution are innovative emerging industries.

Deep seabed mining and biological resources are frontier industries relying on the future of high seas governance.

You will hear today six expert’s presentations that will highlight these remarks. I am delighted to hand over to them.

François Golbery, Chairman, ESAFON

The Sustainable Blue Economy Finance Initiative A pioneering initiative to finance a sustainable ocean economy 15 May 2019, Geneva Butch Bacani Programme Leader UN Environment’s Principles for Sustainable Insurance Initiative

Presenter

Presentation Notes

The sustainability case

Presenter

Presentation Notes

The full potential of the Blue Economy can only be unlocked if economic activity is managed sustainably, including on land�

Significant regulatory, market and physical risks associated with unsustainable activities in the blue economy

Market risks Including market, technology and reputational risks for businesses

Physical risks Including direct damages to assets and indirect impacts from supply chain disruptions

N.B. Risk framework based on the Taskforce for Climate-Related Financial Disclosures’ recommendations for climate-related financial disclosures

Regulatory risks Resulting from changes to policy and legal frameworks supporting ocean health

Policy and Legal

Market

Technology

Reputation

Region- specific

Cross- border

Potential financial impacts • Increased cost of operations and compliance • Reduced size of operations • Greater insurance and/or legal costs

• Reduced demand for conventional goods & services • Higher cost of scarce ocean-based raw materials • Less income/employment from ocean goods & services

• Reduced access to top talent and/or collaboration • Damage to brand value; increased cost of marketing • Disruption in production capacity (e.g. protests, etc.)

• Degradation of ocean resources • Costly safety measures, emergency response,

insurance • Greater uncertainty in deployment of operations • Loss of resource base for extraction & raw materials

GLOBAL OCEAN ECONOMY

Presenter

Presentation Notes

The output of the global ocean economy is estimated at EUR 1.3 trillion today. By 2030 it could more than double. The OECD predicts that, by then, many ocean-based industries could outperform the global economy as a whole both in terms of value added and employment. This makes the blue economy one of the most innovative and creative economies. One recent report estimated that the value of the ocean’s natural assets, if expressed in monetary value, at EUR 23 trillion (Hoegh-Guldberg, O. et al. 2015. Reviving the Ocean Economy: the case for action - 2015. WWF International, Gland, Switzerland., Geneva, 60 pp)

Value added of world’s ocean economy estimated to grow to > USD 3 trillion by 2030 and employ > 40 million

Estimates of growth rates in value added and employment from 2010 to 2030 for world’s ocean economy (Source: OECD)

Sustainable Blue Economy Finance Principles

SDG 14: "Conserve and sustainably use the oceans, seas and marine resources”

7 accepted principles for sustainable

finance

7 principles designed to address blue economy

challenges

Official launch event

"Sustainable Blue Economy Finance Principles: From words to action"

29 October 2018, Bali, Indonesia

Initial signatories and supporters 8F Investment Partners Alimentos Ventures Althelia Ecosphere Bonafide Boston Common Asset Management Fishing Accelerator Greenbackers Investment Capital International Capital Market Association (ICMA) Investas – Association luxembourgeoise des investisseurs privés Mermaid Investments Rockefeller – Ocean Strategy SeaAhead SKY – Ocean Rescue Fund The Nature Conservancy UN-PSI World Bank

Presenter

Presentation Notes

Growing list…

Hosting organisation

Leveraging and complementing global sustainable finance principles and initiatives developed by UNEP FI

2006 2012 2019

Presenter

Presentation Notes

United Nations Environment Programme – Finance Initiative (UNEP FI) is a partnership between United Nations Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. More than 200 financial institutions, including banks, insurers, and investors, work with UN Environment to understand today’s environmental, social and governance challenges, why they matter to finance, and how to actively participate in addressing them. UNEP FI’s work also includes a strong focus on policy – by fomenting country-level dialogues between finance practitioners, supervisors, regulators and policy-makers, and, at the international level, by promoting financial sector involvement in processes such as the global climate negotiations.

UNEP FI-hosted Sustainable Blue Economy Finance Initiative: Initial priorities

• Governance framework • Accountability and transparency framework (disclosure) • Mainstream the Principles and the Initiative in relevant

platforms and complementary initiatives • Create a global base of signatory companies, supporting

institutions, and supporting governments • Collaborative blue economy finance work streams • Update and strengthen the Principles as necessary

Presenter

Presentation Notes

The partners are currently finalising a partnership with the United Nations Environment Programme (UN Environment), through its Finance Initiative (UNEP FI), given UNEP FI’s long-standing leadership spanning sustainable banking, insurance and investment, particularly the development of pioneering global frameworks and initiatives such as the Principles for Responsible Investment (PRI) in 2006, the Principles for Sustainable Insurance (PSI) in 2012, and the forthcoming Principles for Responsible Banking, which will be finalised in 2019. The Blue Economy Finance Initiative will drive the implementation of the Principles and develop the institutional and governance framework necessary to make the Initiative fit for purpose and to realise its full potential. The global base of signatory companies (e.g. banks, insurers, investors) and supporting institutions (e.g. banking/insurance/investment associations and initiatives, financial regulators, civil society organisations, academia) backing the aims of the Initiative

[email protected] [email protected]

For more information:

Presenter

Presentation Notes

Growing list…

Anna CostiucPolicy OfficerDirectorate-General for Maritime Affairs and FisheriesEuropean Commission

GROWTH OPPORTUNITIES

ESAFON Conference – GLOBAL IMPACT INVESTMENT STRATEGY May 15th & 16th, 2019 – Mövenpick Hotel, Geneva

GLOBAL OCEAN ECONOMY


WHAT IS THE BLUE ECONOMY?o All economic activities related

to oceans, seas and coasts.

o Blue economy covers a widerange of interlinked establishedand emerging sectors.

ESTABLISHED SECTORSo Sectors with long-term

proven contribution to the economy

EMERGING SECTORSo New sectors showing high

potential for future development

ENABLERS OF BLUEECONOMY


Direct impact of Blue Economy:• Turnover: EUR 566 bn

• Gross value added: EUR 174 bn

• Gross profit: EUR 95 bn

• Gross profit margin: 16.8%

• Employment: 3.5 million

• Net investment: EUR 22 bn

• Net investment to GVA: 29%

• Average salaries: EUR 28.3 th.

Size of theBlue Economy

2018 Annual Report onthe EU Blue Economy


Established Sectors

Solid performance in most sectors and Member States

Trends


Emerging activities

Blue biotechnology and high-tech products have two-digit growth figures over the period 2014-2016 in some EU Member States

Trends


Blue economy – Winners and Losers


Offshore wind

o 90% of the global installed offshore wind energy capacity is in Europe

o 51% of all wind energy employment

o 210,000 people employed in 2018


By 2050:

o 100 gigawatts of production capacity in Europe

o 76 million European households

o 400,000 jobs in Europe

o 53 billion euros a year


Aquaculture

Aquaculture to reach 60% of consumed fish by 2030 globally

In Europe:o 85,000 jobso 20% of fish production


Blue Bioeconomyo over 17,000 jobso €1.5 billion turnover for direct activities

o €240 million in ancillary activities


Cruise passenger growth

Opportunitites for sustainable investment


470 participants 20 innovators 40 investors Pitching sessions EU funds corner 1200 b2b meetings

2018



[email protected]

mailto:[email protected]

Anna Costiuc

[email protected]

Directorate-General for Maritime Affairs and FisheriesEuropean Commission

Thank You


mailto:[email protected]

High SEAS GOVERNANCE & SUSTAINABLE MANAGEMENT Laurent Develle, Attorney at Law, Of Counsel Froriep Legal SA

ESAFON, 4TH IMPACT WORKSHOP, Geneva, May 15, 2019

23 May 2019 | Page 1

DISCUSSION POINTS

1. Importance of the High Seas (Areas Beyond National Jurisdictions (ABNJs) and increased threats to marine biodiversity

2. Commercial interest and potential reflect today’s challenges of the “Blue Economy”: Develop but Protect

3. Legal gap of High Seas governance, time has come for a treaty to safeguard the health of the global ocean (conserve and sustainably use)

4. Current governance of deep seabed mining governance 5. Overview of the negotiations of the new UN Treaty to govern access,

sharing and exploitation of marine biological diversity (Marine Genetic Resources (MGRs)) in the High Seas (main points at stake)

6. Financing and technology aspects 7. High Seas to become a legal entity ?

23 May 2019 | Page 2

WHY THE HIGH SEAS ARE IMPORTANT?

• https://www.youtube.com/watch?v=p_72ZuMf0yI

• Vast (2/3 of the oceans) and remote, lack of knowledge

• With exceptional biodiversity and ecosystems 95% of oceans life is microscopic (bacteria, planktons, viruses (most abundant life-forms in the

oceans), enzymes, etc.) and extremely diverse. Extreme conditions of life: deep sea organisms have evolved having therefore unusual molecular and

metabolic adaptations. Technological and scientific advancements reveal significant potential for scientific discovery and

exploration. Discovery of the Pacific Oceans hydrothermal vents, home to chemosynthetic species (used chemical

emitted by vents as energy source) (like photosynthesis for plants) (1977, Alvin expedition in the Galapagos Islands)

• High Seas ecosystems now under increased pressure: • Growing demand for resources…”blue economy”, another race for resources? • Global trade have seen an unprecedented increase of activities (fishing, shipping, cruises,

submarines cables) • Such large reservoir of untapped genetic resources have already already increased interest for

biotechnological (bioprospecting) innovation and other business commercial uses (applications in life sciences, rare disease treatments, cosmetics, food, bio-based energy, etc.).

23 May 2019 | Page 3

https://www.youtube.com/watch?v=p_72ZuMf0yI

ECONOMIC POTENTIAL, BLUE ECONOMY IN THE HIGH SEAS? AZT - Anti-leukemia drug developed from a sponge and then the HIV controversial drug AZT. A compound (Ziconotide) used in the chronic painkiller Prialt developed from the venom of the cone shell Some bacteria associated with tube worm used as the source of a compound for Abyssine cosmetic cream. Antifreeze proteins from cold-water fishes used to improve the quality of frozen food. Enzymes extracted from microbes in the mid-Atlantic ridge used to develop biofuels. • Patenting used as a proxy of commercial interest:

12,998 genetic sequences from 862 marine species have been patented (October 2017), 3/4th from microbial species; 12% annual rate increase of patent applications.

Top 5 countries: USA, Germany, Japan, France and the UK. BASF, largest patent owner of sequences of marine species, ½ of the total...

• Multiple patent owners…The purple sea urchin, above, is known for its regenerative properties, and its genetic sequences appear in patents from BASF; a German energy company; the American company Monsanto and a Japanese pharmaceutical company.

Most are looking for organisms with exceptional traits that might offer the missing piece in their new product. • Most nature-based patents originate from areas within countries’ national jurisdictions, not the high

seas. Few exceptions: Antarctic deep-water sponges could be used as pharma enzymes from thermal vent micro-organisms

(production of biofuels) Deep-sea microbes have been used to contribute to anti-aging cosmetic creams.

• Complexity of biodiscovery: Be patient ! From sampling to commercialization could take 5-20+ years. No certainty that those patents may lead to marketable products, but sign of commercial interest.

23 May 2019 | Page 4

WITHIN NATIONAL WATERS: THE NAGOYA PROTOCOL SYSTEM

• MGRs situated in national waters and the EEZ: quite clear system (although not perfect) under UNCLOS (1994) (“constitution of the oceans”), the Nagoya

Protocol (to combat biopiracy) and Convention on Biological Diversity Diversity (CBD) mostly a benefits sharing system, fair and equitable sharing benefits (monetary or not), ABS agreements,

knowledge transfer and capacity building, etc.

• An interesting example: the 2006 UPNG and UBC ABS Agreement:

• Agreement between the University of British Colombia and the University of Papua New Guinea to share royalty revenues from discoveries made using Papuan New Guinean marine products (in this case a sponge), relating to Earth and Ocean Sciences Prof. Ray Andersen’s research into new therapies from natural products (a cancer fighting compound isolated to create an analogue drug that went to clinical trials (Taltobulin)) .

• Revenues will support the country’s exchange and education programs (equip the research labs) and marine conservation activities.

• First ever agreement to consider payment of royalties to a developing country from a drug development project.

• Recently, a new drug was developed using another compound, still from a PNG sponge, developed by a start-up company in which both UNPG and UBC have equity.

23 May 2019 | Page 5

LEGAL UNCERTAINTY OF HIGH SEAS LEGAL GOVERNANCE …THE BIG IDEOLOGICAL DIVISION • Access to MGRs situated in the high seas – No clear answer on who owns the

High Seas ? [current system] High Seas: open to all, Freedom of the seas (navigation, fishing,

research, laying submarine cables, etc.) (Russia, Japan) Common heritage of mankind (CHM) (China, emerging countries): MGRs are not located in a defined location but are vastly spread, so their

existence should benefit all the humanity. MGRs in the high seas lead to progress for humankind (new drugs, etc.) and

should therefore benefit to all countries, Intermediary position (EU, Australia, NZ): no recognition of CHM, but need to

improve current framework requiring a fair & equitable benefit sharing. Business and investment sectors: exploitation of MGRs will require large investments

over time and need to be secured by verifiable legal certainty to avoid any risks of claimed bio piracy associated with material of unknown or unverified origin.

23 May 2019 | Page 6

LEGAL UNCERTAINTY OF HIGH SEAS LEGAL GOVERNANCE …TIME HAS COME • The need to have effective legal governance have become a priority :

• New and emerging activities in the high seas (exploitation of MGRs) were not envisaged at the time of UNCLOS:

• Current legal governance may facilitate a “first come, first served” approach without strict limitations under international law and enhance concentration into few corporations.

• Legal vacuum create a threat where the High Seas could become a new “Eldorado” for uncontrolled and unsustainable human-led commercial activities, which could seriously impact oceans biodiversity .

• Fragmented legal and institutional framework, bring together disparate authorities who do not communicate together well enough (shipping, fisheries, environmental protection).

• Time has come: • Hot issues to be addressed also in key upcoming conferences (2019 G7 Summit, 2020 World

Conservation Congress, 2020 UN Ocean Conference, etc.) • Separate process with the World Heritage Convention to protect certain unique sites in marine

ABNJ, due to their “outstanding universal value”

23 May 2019 | Page 7

WHY NOT THE SAME LEGAL REGIME AS DEEP SEABED MINING AND EXPLOTATION • Deep seabed comes under different rules under UNCLOS (2002): resources considered as part of the

“common heritage of mankind”. Innovative concept at that time, but MGRs were never considered in the UNCLOS negotiations.

UNCLOS defined resources as “all solid, liquid, gaseous mineral resources in situ in the area (seabed, ocean floor) or beneath the seabed”

• Governance established with the International Seabed Authority (ISA) (1994) that has enacted rules and regulations related to sea bed mining activities and exploitation (the “Mining Code” for seabed mining).

• Equitable sharing of financial and other economic benefits from mineral exploitation • New draft regulations on exploitation of mineral resources under discussions (2017)

• Potential: 29 contracts of mineral resource exploration underway in the high seas (valuable mineral deposits,

cobalt, sulfides, polymetallic nodules, etc.) (Russia, Korea, Japan, China, France).

• Challenges: • ISA dual mandate raises conflicts of interests: regulate and grant exploitation licenses vs. ensuring protection

of marine environment. • Monitoring and enforcement • MGRs are not always located in situ but are very movable organisms.

• It does not seen that such legal framework will be used in the current discussions about the high seas Treaty.

23 May 2019 | Page 8

CONVENTION ON THE LAW OF THE SEA ON THE CONSERVATION AND SUSTAINABLE USE OF MARINE BIOLOGICAL DIVERSITY OF AREAS BEYOND NATIONAL JURISDICTION

• How to do it? Certain countries believe a better implementation of existing agreements would be enough to ensure protection and sustainable use of MGRs (Japan, Russia, USA, Canada)

• Certain consensus that MGRs hold a nice promise to help some major challenges (combating diseases with new drugs, using bioremediation to help restore polluted marine environments, Sharing knowledge about MGRs would help conservation efforts, achieving food security, meeting energy demands with alternative energy sources, etc. ).

• UN Treaty on the High Seas discussions mainly led by the EU, Australia, New Zealand and developing countries:

• After 10 years of status quo….now a consensus to develop asap an international legally binding instrument (ILBI) under the UNCLOS (UN Convention on the Law of the Sea) (UNGA June 2015 decision, UN Division of the ocean Affairs and Law of the Sea, Intergovernmental Conferences (IGCs))

• One of the most important negotiating process currently underway within the UN system. • Objective to have a “package deal”: fair, equitable and sustainable ABS of MGRs in ABNJs (Biodiversity BNJs) • 4 major chapters:

Area-based management tools (Marine Protected Areas) – whose authority for governance? ABS (Access Benefit Sharing)

Access to ABNJ (type of notification systems, how the ABS may work to foster scientific research, without impeding investment and R&D)

Sharing of benefits, idea of a clearing house (Nagoya Protocol to monitor compliance) Capacity building, technology transfer between advanced and less developed countries. Environmental Impact Assessment (cables, pipelines, new exploration activities, etc.)

23 May 2019 | Page 9

THE WAY FORWARD FOR THE HIGH SEAS – CURRENT STATUS AND MANY PENDING ISSUES (2ND IGC CONFERENCE MARCH-APRIL 2019)

• Draft of biological diversity treaty and discussions still reveals conflicting stakeholders interests and disagreements on major and numerous issues – very difficult compromise…

• A short list of the many issues at stake & countries’ positions: • Objectives of the instrument: Treaty should advance knowledge of MGRs and be simple and workable

(Norway) an opportunity to facilitate sustainable use of MGRs and equitable sharing of benefits (New Zealand), must-have a long separate section on objectives & general principles (China, Cuba, Iran, Brabados)

• Scope: really key to have fishing activities included in MPAs (Russia favors exclusion)? Quid of digital genetic information (different from biodiversity, falling outside the scope of ILBI ?)

• EIAs: conflicts on compulsory, binding nature of assessments, responsible entity, etc. • Benefits sharing legal justification: Russia: what legal justifications exist to the distribution of benefits and

MGRs recognized as common heritage of mankind. Conflict about monetary benefits or only non-monetary benefits (Australia)

• Clearing house mechanisms remain vague ? • IP rights (patents): included or not (Japan opposed, to be dealt with under WIPO) • Monitoring and enforcement of use of MGRs (Turkey and Algeria strong on that) • Disputes resolutions mechanisms could be more inspired by private corporate law, rather than often vague

and non-binding international laws. • Negotiating such a Treaty: A long and winding road, daunting task:

• IGCs 1st in Sept 2018, 2nd in March/April 2019, 3rd one in September 4-17, 2019 and 4th one first half of 2020 • 2020 negotiations timeline, a treaty in 2024? WILL TAKE YEARS….

23 May 2019 | Page 10

FUNDING & FINANCING OPEN QUESTIONS • Where are the corporate or private capital sector in the discussions ? Despite very significant investment

challenges: • Huge financial resources needs (upfront investment vs. long-term and uncertain returns) • Sophisticated technology required (research vessels, submersibles, lab equipment) • Harmonization of research protocols to ensure credibility of data? • Difficult distinction commercial (bioprospecting activities) and non-commercial (scientific research) uses • Assuming commercialization, what legal forms for monetary benefits to be shared from MGRs exploitation :

percentage of royalties from commercialization?

• Capacity development activities to be sustained (scientists attending deep sea research expeditions, technology training, technology transfer on new molecular biology and DNA sequencing training, innovative ways for conservation training and projects in the developing world, etc.), Setting up a global Trust Fund (World Bank?), contributed by a portion of the revenues generated, to be used for capacity building in developing countries.

• Open access data platform + tax levied on proceeds from commercialization > superfund for the oceans protection

• Bridge start-ups and universities at a certain stage of the research to raise private equity capital in a kind of PPP scheme tied with an ABS agreement (see PNG sponge example). Milestone payments can be paid to those research institutions according to drugs development phases.

• Interdisciplinary nature of many projects raise a serious barrier to many sources of funding.

23 May 2019 | Page 11

IMPORTANCE OF TECHNOLOGY… • Many challenges can be helped by technology that s moving faster than the UN legal treaty

process ! • Defining tracking and access system (notifications based access system) • Translating vast amount of scientific data into knowledge • Importance of open access to MGRs • Data transparency, authenticity, enforcement

• Potential for Planetech and Seatech companies (underwater drones and vehicles, sonar mapping, etc.)

• OceanAhead (Boston): role in bridging planet conservation, start-ups in Planetech and private capital funding.

• Legal certainty and transparency could be helped by certain technologies such as DLTs and Blockchain platforms.

• Large research vessels initiatives consider building MGRs data platforms: • Tara Oceans Consortium (CNRS, EMBL, CEA, MIT, etc.): largest worldwide program on marine

biodiversity using DNA analysis: access and traceability of biological samples (online positioning record, open data repository, capacity building, transfer of technology)

• Norway RevOceans project • Certain countries leading on a separate path: Jamstec facility (Japan)

23 May 2019 | Page 12

HIGH SEAS TO BECOME A LEGAL ENTITY, A MORE RADICAL ROUTE

• Requests of the Earth Law Center (DC), GARN (Global Alliance for the Rights of Nature) • MPAs to grown to 30~50% of the oceans (current IUCN objective is around 10%) • Closing the High Seas to fishing (some studies showing benefits exceeding costs)

• Legal reasoning: Laws and contracts are written to protect the property rights of individuals, corporations and other legal entities. As such environmental protection laws actually legalize environmental harm by regulating how much pollution or destruction of nature can occur within the law. Under such law, nature and all of its non-human elements have no standing.

• Rather than being perceived as resources, assets and property, High Seas to become a legal person, not belonging to one Nation, or all Nations, but instead a living person by itself, with representation of its interests, which we must respect and manage responsibly and sustainably. recognition that our ecosystems – including trees, oceans, animals, mountains – have rights just as human beings have rights

• It would require national laws to: treat and protect the high seas as a legal person to enhance its resilience and better prevent from over-

exploitation. to be precise, including standards and criteria for implementation

• A certain growth of the “Rights of Nature” movement, with pioneer countries like Ecuador (recognized as a constitutional right), Bolivia, US communities, climate justice court actions, etc.).

• Illegal smuggling of sharks by a Chinese ship from the Galapagos: January 2019, document submission to the Ecuadorian Supreme Court, arguing for the Rights of Nature in favor of sharks and their rights. The Penal Code of Ecuador sanctions wildlife crimes as crimes against Nature. It is expected judges must reason their decision in terms of rights constitutionally recognized to Nature.

23 May 2019 | Page 13

Geneva, May 2019

Red Sea & Gulf of Aqaba, 2018

North Great Barrier Reef 2018:

• Last 30 years: 50% of corals lost globally.

• Only 10% of coral reefs expected to survive past 2050.

• Why are they dying? Local environmental stress: Pollution, overfishing, physical destruction … & Global warming –> rising water temperatures

coral bleaching

What is coral bleaching and why is it a problem?

This is coral bleaching:

This is coral bleaching:

1 mm

Algae symbionts:

Bleaching treshhold temperature

The Great Barrier Reef

Largest reef structure on Earth. Surface area the size of Italy. Has lost about 25% of its corals to bleaching in the last decade.

North Great Barrier Reef 2018:

Coral bleaching is happening on a massive scale…

and extremely fast.

Entire reef ecosystems collapse.

But there is one hope: The Red Sea

The Northern Red Sea and Gulf of Aqaba 2018

Recent breakthrough discovery: The Northern Red Sea is a unique coral reef refuge from global warming. Here will exist the ‘last reefs standing’ around 2100. If we can protect them from local stress and destruction. This is a regional challenge with potential to unite all countries in the Red Sea region towards a common goal and interest. Regional collaboration

What is at stake in the Red Sea?

Apart from the natural value of major reef ecosystems and marine biodiversity hotspots:

Major economic and political interests.

Just one example: Egypt has 250.000 hotel rooms along its Red Sea coast. Coastal tourism generates more income than pyramids. The economic stability of Egypt is at stake.

In case of massive coral reef loss, millions of jobs lost. Where will people go?

These are the motivations for establishing the

Transnational Red Sea Center.

The Center will be established at EPFL and operate with the support of the Swiss Foreign Ministry.

The Transnational Red Sea Center will:

• Unite scientists in the region in scientific collaboration.

• Establish an ecosystem and biodiversity ‘baseline’.

• Assess the environmental impact of socio-economic developments along the shores of the Red Sea.

• Provide policy and law-makers with cutting-edge scientific analyses for decision making.

• Be Science for Diplomacy.

Saudi Arabia

Jordan

Egypt

Israel

Eritrea

Sudan

Yemen

Djibouti

Regional policy &

operational collaborations

Ecosystem studies Genetics Physiology Ecology Biodiversity Monitoring …

Ecosystem Services, Characterization &

Risk Analyses (Cross cutting)

Climate Change & Disaster Risk Reduction & Valuation: • Hazard vulnerability mapping

(including threats from urbanization, agriculture, industry, demography change)

• Data management

Environment: • Regulation (hydrology,

physiochemical, biophysical)

Economy: • Tourism (general and specialized) • Provisioning (fish stocks, medical

substances, new chemistry) • Employment

Society: • Cultural significance • Information and knowledge

Measures: Protection – immediate and long term. Preservation & restauration – mid to long term. Geographical replication and knowledge transfer – long term.

Scientific collaborations

Funding for the Center has two components: 1) Scientific work and training of young scientist. Private funding, EU projects, Red Sea countries.

A decade of scientific work and monitoring: 100 MCHF

2) Research infrastructures in the Red Sea countries. E.g. the European Investment Bank initiating major investments in new scientific facilities in target countries.

Why invest in the Transnational Red Sea Center?

It’s an investment to:

Minimize the loss of the last pristine major coral reef ecosystem that has a chance of surviving. Avoid the major negative socio-economic impacts that Red Sea coral reef ecosystem collapse will entail. Create a very strong example of science for diplomacy.

Special thanks to Swiss Foreign Ministry:

Can Tutumlu, Niccolò Iorno, Jacques Ducrest, Jean-Daniel Ruch, Nadia Zuodar EPFL:

Olivier Küttel, Julia Binder, Stéphane Decoutère

ESAFON: workshop and conference

Innovative Finance Solutions for Conservation and Exploring the Last Frontiers

Introduction

Our oceans are changing faster today than at any time in human

history

Impacts of the changing ocean include more intense storms, sea-level rise, acidification,

deoxygenation and warming

The ocean-economy, covering broad categories of employment

and ecosystem services is estimated at between USD 3-6

trillion a year

These impacts will have significant consequences with

widespread implications for food security, coastal infrastructure, biodiversity and the lives and

livelihoods of many millions of people across the globe

Already, half of the world’s population lives within 60

kilometers of a coast, and more than 600 million people (10% of the world’s population) live in coastal areas that are less than

10 meters above sea level

Scale of the problem

Sea level and population density projections indicate that 800 million people will be at risk of coastal flooding and storm surges by 2050

In the last 10 years, insurers alone have paid out more than US$ 300 billion for coastal storm damage, but this is dwarfed by the amounts paid out by governments and taxpayers

The World Bank recently identified for example the impact of extreme disasters as equivalent to a global USD 520b loss in annual consumption, forcing some 26 million people into poverty each year

The benefits of resilience building interventions (including insurance policies), would help countries and communities save USD 100b a year and reduce the overall impact of disasters on well-being by 20%

Source: INNOVATIVE FINANCE FOR RESILIENT COASTS AND COMMUNITIES A briefing paper prepared by The Nature Conservancy and the United Nations Development Programme for Environment and Climate Change Canada, 2018

A population approaching 10bn eating more protein, living in coastal areas and running up against environmental limits

The protective benefits of natural capital are clear and yet we are perpetuating environmental degradation

Source: Mapping Ocean Wealth, TNC

Solving the challenges with impact investing

New models are needed to fund, deliver and scale innovative solutions to social, environmental and economic challenges.

Public funds in many countries have become depleted Environmental challenges have mounted

Impact investment - the provision of finance with the explicit expectation, and measurement, of a social as well as financial return. Spurs social innovation Increases accountability (measurement of outcomes) Enables sustainability of organizations addressing SDGs

New financing models are developing at multiple levels and in parallel to traditional markets.

A growing range of environmental and social investment instruments have been developed, all with a different financial/impact return profile

Coral Reefs Generate $36B Annually

Healthy coral reefs: • Sustain 25% of marine life • Provide revenue and food security for

up to 1B people in ~100 countries • Protect shoreline property,

infrastructure, and lives by reducing wave energy by 97%

• Contain valuable medicinal compounds used in pharmaceutical products

• Powering the Economic Growth of Nations, Industries, and Communities

• But Half of Global Reefs Perished Since the 1970s and 90% are Projected Dead by 2050

Source: Coral Vita

Conservation challenge - traditional conservation funding

model struggles to effectively respond to

modern dynamics

• Short-term contracts and lack of flexibility limiting service providers’ ability to focus on long-term impact

• Shortage of funds insufficient to deliver long-term scalable impact—governments and limited philanthropic capital (often earmarked) are not enough

• Lack of capacity for adaptive management needed for protected area managers to manage their sites adaptively are missing from traditional funding models

• Lack of accountability, no rewards or

punishments based on success/failure of interventions and data and reporting is often limited so successes cannot be tracked and replicated

Challenges of the traditional species-focused conservation funding model

Traditional species-focused conservation funding model

Cashflow from Donor Outputs

1. Government, foundations, corporates or individuals provide funding for project implementation for a fixed period of time (3-5 years)

3. Service provider adheres rigidly to budgets and logframes and reports back on project outputs to funder (e.g. number of ppl trained)

2. Conservation organisation receives funds and implements project activity (e.g. trainings held)

Government department or

donor

$

Conservation organisation

The data gap… Modeling Vulnerability in Coastal Areas and Layering Socioeconomics

Exposure

Model EXPOSURE: Use elevation data to identify coastal areas that are prone to flooding

Sensitivity

Model SENSITIVITY: Use socioeconomic indicators in census data to identify where people are more susceptible to harm during a storm event

Impact

Combine EXPOSURE and SENSITIVITY to identify high IMPACT areas

Adaptive Capacity

Now model ADAPTIVE CAPACITY: Within high impact areas, identify where people are less likely to anticipate, respond, and recover from a storm event

Source: Margles, S.W., V. N. Agostini, L. Roth, B. Gilmer, S. R. Schill, J. E. Knowles, and R. Blyther, 2016, Assessing Vulnerability: An Integrated Approach for Mapping Adaptive Capacity, sensitivity, and exposure to coastal hazards in Grenada. Climatic Change, 1-15. http://link.springer.com/article/10.1007/s10584-016-1642-0

http://link.springer.com/article/10.1007/s10584-016-1642-0

Critical Infrastructure & Facilities Sensitivity Index

Social Sensitivity Index Adaptive Capacity Index

Adequate infrastructure and access to critical facilities decreases a communities' sensitivity and increases their ability to respond or be prepared.

Population and housing density, youth and elderly, communication capacity, and transportation access contribute to a communities’ overall sensitivity.

Human and civic resources such as level of education, access to retraining programs, and other factors determine coping and adaptive capacity of communities.

Direct investing, few opportunities beyond ecotourism

• Coral Restoration is proven to work but current efforts are grant funded, lacking species resiliency and diversity, ocean-based farms can’t scale

• One company has begun to built a model of Commercial Land-Based Coral Farms using microfragmentation and assisted evolution

• Selling to resorts and developers, governments, tourism, cruise operators

• Have raised $1.5m with Series A planned for this spring

• Launched in the Caribbean

• Goal in 2020 to 100k+ corals produced per farm per annual cycle

Source: Coral Vita

Besides direct investments, what

structures can financial solutions

take to deliver solutions?

Source: INNOVATIVE FINANCE FOR RESILIENT COASTS AND COMMUNITIES A briefing paper prepared by The Nature Conservancy and the United Nations Development Programme for Environment and Climate Change Canada, 2018

Coral reefs provide valuable services

Coral reefs are damaged by hurricanes (or other insurable risk) that reduce their ability to provide these services

The cost of restoring the reefs after a storm is less than the losses in environmental services and less than other manmade structures providing the same services

There are interested parties to buy the insurance on the reef and ensure the reef is restored

Reef insurance basics

Coral reef insurance

Tourism tax

Reef insurance Coastal Zone Management Trust

1. Tourism taxes are paid into the Trust

2. Trust capitalised for services for reef restoration, maintenance and resilience needs.

3. Trust purchases insurance policy for reef: a parametric catastrophe insurance

4. Parametric event triggers payout into the trust for emergency restoration work

5. Tourism industry, hotels benefit from the payout for outdoor facilities, beach cleanup

6. Livelihoods of local communities, tourism workers, and on-shore assets are protected

$120 000

$920 000

$1 720 000

$2 520 000

$3 320 000

$0

$500 000

$1 000 000

$1 500 000

$2 000 000

$2 500 000

$3 000 000

$3 500 000

Year 1 Year 2 Year 3 Year 4 Year 5

Reef Trust Capacity and Investment Growth

Infrastructure

Beach

Reef

Trust balance post policy purchase

Trust investment potential by category

Blue bonds

Blue Bonds for Conservation leverage upfront philanthropy to

catalyze as much as 40 times more in additional investments, which

will be used to protect over 4 million square kilometers of the world's oceans in the next five

years for 20 island nations so far

The savings from the debt refinancing is then used to invest in marine protection efforts that

will revitalize fisheries and protect coral reefs.

Blue bonds

1.Upfront philanthropic capital

for feasibility

Local government, conservation advisors, Commercial investors

negotiate debt-for-ocean--i.e. protecting 30% of ocean area of designating MPA in

exchange for restructuring of debt--

converting debt held by other countries into

more manageable debt held by a local entity

1.Conservation plan put into effect for protection, restoration and safe-use

1.Country repays local entity who executes

conservation measures

Threats from potential Ocean system failure rising up the scientific & political

agenda

WX & climate related events costing over

$300b/year

Ocean Change costing lives/livelihoods, economic

& ecosystem impacts around the world

Governments encouraging multi-sector

collaboration to build resilience

Ocean Risk and Resilience Action Alliance

Insurance/Finance sector has capacity & expertise to help develop solutions

Integrate scientific understanding of ocean change & nat cap role in

mitigating risks

Enabling the environment to model,

price, finance & transfer risk to increase resilience

“Raise taxes on firms that harm nature, OECD tells G7 countries”

Species-focused

investment: in theory

Ecotourism association

Livelihood benefits Species Outcomes Fund

1. Ecotourism association (representing lodges, park fees) pays tourist tax into a Trust Fund dedicated to species outcomes.

2. Fund contracts services for monitoring, infrastructure, and protected area needs

3. Fund supports microfinance, insurance, and livelihood enabling activities

4. Local communities benefit in the event of loss or damage from wildlife and pressure on species is reduced

5. Ecotourism association benefits from the payout as natural assets protected

6. Livelihoods and tourism assets are protected

Species and MPA benefits

Species-focused

investment: in practice

Ecotourism association

Livelihood benefits Species Outcomes Fund

1. Ecotourism association (representing lodges, park fees) pays tourist tax into a Trust Fund dedicated to species outcomes.

2. Fund contracts services for monitoring, infrastructure, and protected area needs

3. Fund supports microfinance, insurance, and livelihood enabling activities

4. Local communities benefit in the event of loss or damage from wildlife and pressure on species is reduced

5. Ecotourism association benefits from the payout as natural assets protected

6. Livelihoods and tourism assets are protected

Species and PA benefits

Rhino Impact Investment Project: The world’s first species-specific outcomes-based financing mechanism

• RII Sites have targets to grow their black rhino population

• Investors finance strategic management activities to meet those targets

• Outcome-payers pay the investors back their investment and an additional return

• Outcome-payers pay the investors back only some of their investment

Similar problems have reached the Antarctic

Rising Sea Temperatures

Ocean Acidification

Coastal Development Over/Destructive Fishing Pollution

Ship Groundings

Antarctic Treaty

• Argentina, Australia, Chile, France, New Zealand, Norway and the UK + nations involved in scientific research in the polar region – the US, Russia, South Africa, Japan and Belgium – all signed the Antarctic Treaty

• Since 1961: this suspends all territorial claims, bans all military activity in the region, preserves it for peaceful scientific research, inspecting each others’ research activities on request, and resolves all disputes by consensus. Parties to the treaty now number 53

• Now that the technological barriers to Antarctic exploration have eased, more and more states are seeking access to Antarctica, putting pressure on the governance structures

• Mineral, oil and gas wealth; reserves of iron ore, coal and chromium • The Antarctic continent has lost three trillion tonnes of ice since 1992 • Comes up for renewal in 2048

But the agreement is

breaking down

• Commercial fishing of both fish and krill in the world’s most nutrient-dense waters

• Massive krill fishing for krill oil (omega 3s) for supplements, fish feed

• Affecting penguin and whale colonies

• In 2018, for the sixth year running, they failed to agree on plans for a marine protected area off East Antarctica

• Excess of recent waste found

And microplastics, PFCs abound

Traces of microplastics (mainly microfibres) and persistent hazardous chemicals found in majority of snow and ice samples taken earlier this year

Estimate of potential input of between c. 44-500 kg of microplastic particles from personal care products and 0.5-25.5 billion plastic fibres from laundry entering the Southern Ocean per decade

Paint fragments were present at all sampling stations and were approximately 30 times more abundant than plastics

How do these get to the Antarctic?

And how long do they last?

Investable solutions for the Antarctic?

• Ecotourism—supporting only sustainable tour operators

• Sustainable fisheries • Marine protected areas • Indirectly: solutions

eliminating PFCs, plastics, low-sulfur bunker fuel or emissions-mitigating shipping technologies

OCEAN SUSTAINABILITY

BUILDING AND FINANCING

DR ANTONELLA CALVIA-GOETZEUROPEAN

INVESTMENT BANK

4th Swiss Impact Investment Initiative Workshop meeting: Building the Eco-system around SDG-14 and the Blue economy - ESAFONMay 15th 2019 - Geneva

All rights protected. Antonella Calvia Goetz

DISCLAIMER

21/05/2019 2

This Presentation is incomplete without reference to, and should be viewed solely in conjunction with, an oral

briefing provided by the European Investment Bank (“EIB”) and the European Investment Fund (“EIF”)

(together, the “EIB Group”). This document is intended as an outline for discussion purposes only and made

on an indicative basis. All figures set forth in this Presentation are subject to change, to a satisfactory due

diligence and to all necessary internal approvals of EIB Group.

The information in this Presentation reflects the prevailing conditions and the view of EIB Group as of this date

and are accordingly subject to change and based on carefully selected sources believed to be reliable. EIB

Group has not independently verified this information and does not make any representation or will be liable

that such information is accurate, valid, timely and complete.

This Presentation is provided without any liability whatsoever for EIB Group and shall not constitute any

obligation of EIB Group to enter into any transaction. This document is intended to provide a basis for

discussions and does not constitute a recommendation, a solicitation, an offer or a binding commitment –

either implicit or explicit – on the part of the EIB, the EIF and/or or any other person to enter into one or more

transaction(s). Neither this presentation nor any of its contents may be duplicated, published or used for any

other purposes without the prior written consent of EIB Group.

European Investment Group

KEY CHALLENGES FOR OCEAN SUSTAINABILITY FINANCING• Market failures ( limited information, high risks,

diverse stakeholders, uncertainty of the economic values, potential conflicts in sharing benefits and costs, high degree of externalities and spillovers)

• Sustainable funding structures require a change in the eco-system and mind-set of the planners and users because there are key interdependencies

• Projects need partners from the private and public sectors to share common standards and goals (soft and hard regulations)

• The public partners need to evaluate (costs benefits analysis of investments) and monitor increasing risks

• The private partners need to share the risks of investments in infrastructure and technologies

Inform

Engage

Team up

Act

We need leaders who are SDG 14 ready to act

Inform

INVESTING IN OCEAN SUSTAINABILITY – WHY DOES IT MATTER? Goal 14 of the Sustainable Goals (SDGs) – Life below water 14.1 - By 2025 prevent and significantly reduce marine pollution 14.2 - By 2020 sustainably manage and protect marine and coastal eco-systems 14.5 - By 2020 conserve at least 10 per cent of coastal and marine areas 14.a Increase scientific knowledge, develop research capacity and transfer marinetechnologies Oceans cover ¾ of Earth Surface, contain 97% of the Earth’s water and represent 99% of

the living space Over 3 billion people depend on marine and coastal biodiversity for their livelihoods Marine fisheries directly or indirecty employ over 200 million people Globally the market value of marine and coastal resources and industries is estimated at 3

trillion per year or about 5 % of global GDP Oceans absorb 30% of carbon dioxide produced by humans Oceans account as primary source of protein for 3 billion people

Source: UN Environment Goal 14

INVESTING IN OCEAN SUSTAINABILITY – WHAT IS AT STAKE?

Global value of marine industries – over USD 3 trillion Marine industry (shipping, port operations, dredging and other services)

USD 500 billion Offshore oil and gas USD 505 billion Marine and coastal tourism USD 390 billion Fisheries and acqua-culture USD 100 billion Emerging industries USD 2 billion Coastal and water infrastructure USD ? The marine industry is expected to grow by 3.5%annually globally, but some sectors, for exampleoffshore wind activities are expected to growth by 8%by 2030

Source: OECD 2016. The OceanEconomy in 2030

CHALLENGES TO OCEAN SUSTAINABILITY AND FUNDING

Key dilemmas: Natural marine resources are scarce and trade-offs need to be

managed sustainably in their exploitation Funding gaps exist for sustainable and innovative “blue

businesses”, notably investments promoted by SMEs There is a lack of mature and bankable projects for major

infrastructures What we can do?

The balance between increasing ocean uses and marine ecosystems’ integrity, requires actions on multiple fronts and new thinking

Ocean activities should be measured in terms of both sustainability and business opportunities in a way to increase project capacity and their funding readiness

Research-based solutions are essential to enhance knowledge and understand marine eco-systems and their functions in a way to improve ocean industries’ performance and develop sustainable ocean activities to be funded

Source: OECD 2019 – Rethinking Innovation for Sustainable Ocean Economy

Engage

ENGAGEMENT CHALLENGES

Today there are still no major dedicated private investment vehicles on ocean activities

Gaps originate from: No systematic analysis of risks and data for guiding

feasibility and assessment No global regulations to establish standards and assess

impacts Business proposals and solutions require a complex web

of agreements and a wide set of expertise, which go beyond the reach of the private financial sector

Dis-aligned incentives make difficult to commit financial resources and search for viable projects, although the pledges are high

All rights protected.

BUILDING OCEAN SUSTAINABILITY FINANCING

Address the knowledge gaps in way to deliver progress on both scientific and technological fronts

Foster a pilot approach to promote ocean innovation Support and develop business proposals to submit to

the financial community What we can do?

Build ocean economy innovation networks with a diversity of players (public research institutes, enterprises, universities and financial actors, IFIs, NGOs) Eg. ESAFON, FRIENDS OF OCEAN, OCEAN VISION

Construct bridges between organizations with differences inpurpose and objectives in a way to start balancingopportunities for research and commercial potential

Connect and enhance competent and committed counterparts Mobilize Technical Assistance to “upgrade” technologies

ROADMAP TO ENGAGE PRIVATE AND PUBLIC INVESTORSD

ata Systematic

data set and modeling based on case-studies

Sce

nar

io A

nal

ysis Identify

stress test linked to specific pilots to define sector outlooks

Targ

etin

g Measure potential investments costs and benefits of pilots

Imp

licat

ion

s Identify financial and economic returns of ocean projects

Div

ersi

ty

Classify the risks to the different shareholders and stakeholders in terms of intensity and time frames

Tran

spar

ent

too

ls Cost-efficient, dynamic, financially relevant, modular business models and valuations


Team up

OPPORTUNITIES TO TEAM UP TO REACH IMPACTS

Establish new standards

and governance and financial models for

ocean projects

Develop mechanisms for blended

financial vehicles:

grants, loans, equity on a test-basis

Stress testing and risk

screening to set up

industry guidance

Ability to plan complex geo-

political agreements

Ability to interpret

incomplete data, quantify the location,

magnitude and timing of

emerging risks and take hard

decisions

Costal Engineering

Environmental Economics New statistical models

To manage risks we need new competences to measure risks and integrate the knowledge in financial decisions

New disaster managersNew legal and governance structures


CRITERIA FOR MATURE INVESTMENT PROPOSALS

(BUSINESS PLAN TEMPLATE)

• Objectives

• Target market

• Value added (With-without project scenarios)

• Stakeholders/Shareholders

• Management team

• Investment strategy

• Track record

• Geographical scope

• Legal and governance structure

• Sharing of risks for the different financial actors

• Proposed terms of funding

• Expected returns (ERR, IRR)

• Other investors

• Implementation of the investment

AN INVESTMENT PLATFORM – THE ROLE OF THE PRIVATE SECTOR

• Form dedicated SDG14 ready management teams to work with academic and IFIs experts

Define sustainable ocean investment strategies locally relevant

Support specific pilot projects via sponsorships

Identify new targets and support the creation of deal flows

• Act together with public and private investors and experts

Help projects to become more attractive for funding

Recommend the legal and funding structure

Negotiate the proposed terms

Measure the expected returns and impacts

Disseminate good results

ACTION PLAN FOR DEVELOPING SDG14 READY LEADERS

Team up with different participants to build a knowledge/research and investment platform

Select successful pilots/programs to set best practice in terms of modelling impacts and risks

Engage the private players and decision makers to be part of the learning process and test the models

Learn together on these pilot projects how to manage execution risk and develop a common approach to a continuous process improvement to enable the projects to mature

Set the networking conditions for ocean sustainability Continue to learn in a way to promote development of the sector by

building success stories


THANK YOU

• Q&A

[email protected]


SWISS IMPACT INVESTMENT INITIATIVE

The 4th Impact Workshop May 15 2019, 3.00 pm to 5.30 pm, Mövenpick Hotel

1

Briefly to summarize and conclude, Switzerland has a key role to play.

It has the international bodies, the diplomacy, the research capability and technology, the legal competency.

This initiative suggests the strengthening of global partnership behind borders to team up around ocean sustainability building and financing. The Red Sea International Centre is a perfect illustration and we are proud to have initiated a constructive dialogue with the European Investment Bank to help finance a pilot project.

Thank you all for participating.

The ocean needs a voice to defend itself – let the Swiss Impact Initiative be that voice! Thank you!

François Golbery, Chairman, ESAFON

swiss impact investment initiative the 4 impact workshop...

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