Finance for the blue economy

The virtuous finance of the "Blue Economy

A global market growing at twice the rate of the terrestrial market over the next 10 years, leading international groups organizing for the ecological transition, start-ups scaling up and making an impact, technological challenges to be met, renowned laboratories and researchers, international cooperation, debt and equity investors, international standards, impact metrics, a worldwide craze for ecology...and young managers full of energy, passion and innovation. The oceans are no longer the sole preserve of adventurous sailors, and protecting them is no longer the preserve of a handful of activists. From renewable energies, to aquaculture, to plastics recovery, the Ocean is becoming the source of a young, virtuous and growing industry, whose market for the 5 main sectors is estimated at $3 trillion by the World Bank in 2019.

This "blue economy" is quite fragmented: huge investments are needed for infrastructures (wind farms, energy transitions for maritime transport, plastic pollution...), smaller investments are enough for local projects that can also have an impact (marine reserves, seaweed farms, innovation in aquaculture,....).

In this second phase of projects, the private financial sector is taking on a structure similar to that of the traditional start-up industry.

Cost-effective coastal protection...and therefore sustainable!

To motivate investors, we need to provide them with profitable business models, financial benchmarks and assurances of liquidity. But ecological projects are often run by associations, which can more easily benefit from public donations and subsidies. As a result, the associated business models either don't exist or aren't optimized. Except that....it is possible to combine Ocean Ecology with a balanced or even profitable business. This is the mission of the French company " Blue Finance ", which develops profitable projects for the management of marine protected areas (MPAs).

Imagine the marine parks of Calanques, Port-Cros, Iroise and Côte d'Opale.... breaking even and saving tens of millions of euros in state funding (an average of 6 million euros per park per year). After an economic study phase, Blue Finance defines a business plan for the MPA concerned, highlighting its assets: tourism, nautical activities, fishing, renewable energy, etc. This document enables Blue Finance to build the financial engineering - public/private - for the initial investments. Blue Finance then assists the MPA in its management to ensure the plan's execution. Blue Finance has concluded its first MPA under management in the Dominican Republic (800,000 ha - in comparison, Port-cros is 3,000 ha), and is in the process of signing 5 other MPAs. Proof that ecology and business are not mutually exclusive.

Crowdfunding

Crowdfunding platforms have emerged to enable anyone to invest early on in projects/companies they wish to support. Like well-known platforms such as Wiseed, Indigogo, kickstarter...which can raise several hundred thousand euros per project, Mael Prud'homme launched the ekosea crowdfunding platform for marine start-ups in 2015. With 146 projects financed since 2015, 800 kE raised, 10,000 contributors and a success rate of 85%, Mael also has the ambition to raise funds for his platform to better professionalize the world of marine start-ups, improve his support and advice for projects: don 't hesitate to support him in his move to open up his capital. Smaller in scale than its larger cousins, the ekosea platform encourages the creation of new businesses and contributes to the collective drive to protect the oceans.

Seed and Series A

After this initial financing, start-ups can pursue their growth by approaching professional investors.

• Business Angels: a group of entrepreneurs has founded the " mer angels " association to finance projects in the maritime economy, which accounts for 14% of GDP. Although ocean protection criteria are not a prerequisite for their investments, Mer Angels will be sensitive to any maritime projects that participate.

• Accelerator/incubator: California-based SOA (Sustainable Ocean Alliance), founded by young CEO Daniela Fernadez, is developing 2 acceleration programs: training leaders to lead ocean projects (this is the "education" theme), and incubating start-ups that take up the challenge of saving the oceans. This incubator, launched in 2018, has already welcomed over 15 start-ups. Supported by media-savvy managers like Salesforce boss Marc Benioff, SOA aims to be able to incubate 100 start-ups by the end of 2021. A sort of "Station F" for the oceans, California-style. Even if you're not from California, you can submit your project to the SOA team: there's no national discrimination in the ocean rescue challenge!

• VC (venture capitalist): the tremendous growth of Californian start-ups has led to a strong interest in this type of company on the part of French investors. VCs invest in innovation, whether in terms of use or technology, and in projects that can be deployed on a large scale and sold over time. A first French VC was formed in 2019, to address ocean protection projects on 2 main themes: the seaweed industry and aquaculture. Blue Oceans Partners has already made 2 capital investments in 2 projects that respect the United Nations' SDG14 constraints. Their investment process is identical in all respects to that of "other" VCs: capital increase, negotiation of a shareholder agreement, presence on the board of directors,.... We can only wish them success in their future endeavors to increase investor appetite for SDG14-compliant projects.

Series B, C,...and others

Finally, when the company becomes profitable or the project requires more substantial investment, other types of investor take over. It may be necessary to structure Series B or C financing rounds, or to use bank financing packages.

• Adiant Capital: Initially involved in the carbon business, Adiant (Switzerland) is now diversifying into ocean protection projects. With over 3 billion euros invested in 8 years, Adiant is a patient investor with solid experience of sustainable projects.

• Althelia: This UK investor has created a $100 million sustainable ocean fund. The SOF is backed by a sovereign wealth fund and public-sector underwriters. It invests in projects dealing with plastic pollution and sustainable fishing. This investor plans to invest in 15 to 20 projects over 8 years.

And the banks?

Banks typically provide debt financing. For private companies, you need to demonstrate your ability to repay this debt, and therefore at the very least a positive operating result. Or else, they will need solid guarantees and "co-guarantors". These common-sense criteria naturally exclude young projects and start-ups.

However, it is worth noting the efforts made by French banks to integrate SDG14 criteria into their CSR strategies. Société Générale, CIC, Crédit Agricole and BNP Paribas have signed up to the "Poseidon" rules. These rules aim to reduce greenhouse gases and decarbonize maritime transport, with a target reduction of 50% by 2050. Their financial support will be subject to an assessment of their shipping customers' efforts to reduce CO2 emissions.

Finally, we should also mention the efforts of BNP Paribas, which, thanks to the in-depth work of Pierre Rousseau, the bank's strategic advisor, co-finances major sustainable infrastructure projects such as wind farms and large-scale aquaculture farms.

Originally, the oceans had been the "forgotten" part of the United Nations' global environmental program and its SDG document. By making up for this oversight and integrating the oceans into its global plan, the oceans are regaining legitimacy in their contribution to the health of the planet: we have 10 years to save the oceans and their inhabitants. Awareness is growing, and the urgency of the situation is giving rise to exciting economic projects. A whole value chain is being set up, and the world of investors and financiers is part of it. But while there is no doubt that the ocean economy is growing, the challenge will be to achieve sustainable growth that respects the oceans. Without global ocean governance, this is a real concern for many.