Special Edition - Blue Economy  |  8 June 2022
The World Oceans Day is here to remind us that three billion people rely on the ocean for their food and livelihoods. SIDS, who are custodians of 19.1 percent of the world’s Exclusive Economic Zones, are well aware of the importance of oceans and have a strong conviction that the adoption of a blue economy development pathway can help them harness their unique advantages to address their structural challenges and common vulnerabilities.

The blue economy approach can enable economic diversification in SIDS by exploring new sustainable economic sectors like marine biotechnologies and sustainable aquaculture. Restorative aquaculture, for instance, could even provide direct benefits to the environment and livelihoods, and many Caribbean SIDS have been identified among the regions with the highest potential for this kind of aquaculture. SIDS’ rich and diverse maritime cultural heritage also offers numerous opportunities in the orange economy, namely for reimagining the tourism industry. Finally, embracing a sustainable blue economy transformation plays a key role in climate change mitigation and adaptation by offering sustainable renewable energy opportunities and nature-based solutions.

The need to sustainably use ocean resources for economic growth has been asserted in SDG target 14.7, that calls on states to “increase the economic benefits to SIDS and least developed countries from the sustainable use of marine resources, including through sustainable management of fisheries, aquaculture and tourism”. Some SIDS are leading in the achievement of this target with sustainable fisheries contributing to 9 percent and 10 percent of GDP in the Federated States of Micronesia and the Republic of the Marshall islands, respectively, compared to the world average of 0.1 percent.

Through a sustainable blue economy approach, SIDS are also protecting their environment and tackling the root causes of environmental degradation, creating innovative financing mechanisms, and using digital technologies to diversify their ocean economic sectors. As Peter Thomson, UN Secretary-General's Special Envoy for the Ocean, mentioned on the blue economy transformation in SIDS, in our exclusive interview: “This should be accompanied by measures to ensure that SME have access to technology and financing. The development of sustainable financing tools like impact bonds, debt-swaps, and blended finance mechanisms to accelerate this transformation is well underway. Very importantly, SIDS should be realistic about the sustainability of the new opportunities on offer, in order to avoid past mistakes.”

In this bulletin, we recognize that economic development alone is not a synonym of a sustainable blue economy transformation, and we discuss key considerations, opportunities, and interventions needed to ensure an inclusive blue economy transformation in SIDS.

Image: Asian Development Bank
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Keywords:   Rising Up For SIDS, blue economy, ocean governance, economic diversification, data science, geospatial, machine learning, green recovery, biodiversity, marine protected areas,  sustainable development, gender equality, digital transformation, livelihood empowerment, renewable energy, orange economy, sustainable aquaculture, fishery management, blue finance
Accelerating the blue economy in SIDS
Image: ADB, Shutterstock, Ocean Image Bank
The Blue Economy provides a critical means for SIDS to accelerate development in the integrated pillars of the UNDP SIDS Offer "Rising Up For SIDS", including in Climate Action and Digital Transformation. The considerations below are drawn from the experience of SIDS as they innovate in utilizing a Blue Economy approach to improve lives and livelihoods.
An integrated approach is key to effective ocean management
Image: Fransisco Blaha
The global ocean is under unprecedented stress

The ocean faces increasing threats from existing and new stressors, including pollution, unsustainable fishing, habitat loss and degradation, invasive species introductions and climate change (the latter including ocean acidification, ocean warming and ocean deoxygenation). Globally, 32.4 percent of fish stocks are over exploited, and 15.3 percent collapsed. In addition, some 5 to 12 million metric tonnes of plastic enter the ocean each year. These threats largely derive from unsustainable sectoral activities both in the ocean and on the adjacent land masses, including sectors such as shipping, fisheries, agriculture, waste management, tourism and coastal development.

The SDGs defines an integrated approach for better ocean health

SDG 14 calls on stakeholders at all levels to “conserve and sustainably use the oceans, seas and marine resources for sustainable development”. SDG 14 established a series of ten targets and associated indicators covering issues such as pollution, overfishing and marine protected areas. One of the targets, SDG 14.2, calls up on nations to, “by 2020, sustainable manage and protect marine and coastal ecosystems to avoid significant adverse impacts including by strengthening their resilience, and take action for their restoration in order to achieve healthy and productive oceans”.   The indicator for Target 14.2 is “Number of countries using ecosystem-based approaches to managing marine areas”. As defined by the Convention on Biological Diversity, the ecosystem approach is “a strategy for the integrated management of land, water and living resources that promotes conservation and sustainable use in an equitable way, based on the application of appropriate scientific methodologies focused on levels of biological organization which encompass the essential processes, functions and interactions among organisms and their environment. It recognizes that humans, with their cultural diversity, are an integral component of ecosystems”.  In the ocean, the ecosystem approach recognizes the complex interlinkages, including energy and mass transfers between ocean physical, and chemical and biological processes including the wide range of trophic levels in marine ecosystems, from the tiniest viruses up to the largest marine mammals.

In the context of advancing progress on SDG 14, taking an integrated, ecosystem-based approach to the management and governance of marine and coastal ecosystems is paramount.  Such integration can take multiple forms, including:

  • Across sectors (and the line ministries responsible for them) such as shipping, fishing and aquaculture, tourism, energy, etc;
  • Across different ocean stakeholder groups including the public (government) sector, private sector, civil society organizations and the general public;
  • Across different levels of governance including local, provincial, national, regional and global. 
Integrated approaches (not only for the oceans but also for land and water) often emphasize incorporation of the three E’s: environment, economy and equity, in the context of management that sustains the natural resource base, supports socioeconomic development, and is inclusive, fair and equitable in terms of the sharing of benefits with all relevant stakeholders. This is even more relevant in SIDS, where every activity on land will virtually impact the ocean

The tools are available for SIDS

An increasing number of approaches, tools and methodologies have been developed over the years that support application of integrated, ecosystem-based approaches to ocean and coastal management and governance. At the local, provincial and national levels, these include Integrated Coastal Management (ICM), Marine Spatial Planning (MSP), Marine Protected Areas (MPA) and Locally Managed Marine Areas. Marine Protected Areas now represent some 7 percent of ocean area towards the SDG 14.5 target of 10 percent. PEMSEA, the Partnerships in Environmental Management for the Seas of East Asia, has scaled up ICM in East Asia to a level that includes over 114 sites, including in Timor-Leste and Singapore, covering some 40 percent of East Asian coastline. At the regional level, the Large Marine Ecosystem (LME) approach fostered by the Global Environment Facility has gained significant traction over the last 25 years, with some 23 of the world’s 66 LMEs applying this approach to the management and governance of multi-country ocean space. In addition, the concept of the ‘Blue Economy’ is gaining increased recognition as SIDS are developing blue economy assessments, policies, plans and strategies towards the achievement of their optimal blue economy ambitions.

SDG 14 is among the most ambitious of all the 17 SDGs, with four targets that came due in 2020 and one in 2025. Given the enormous complexity and diversity of both ocean ecosystems and the human societies that depend upon both the market and non-market goods and services the ocean provides to humanity, it is critical that ongoing efforts to sustainable ocean management and governance incorporate integrated, ecosystem-based approaches that sustain ocean resources, foster the blue economy, and deliver equitable benefits to all.

Data and local capacity are key to accelerating the blue economy
Image: Blue Economy Forum 2017
You can’t manage what you can’t measure

In 2020, an international team of 43 scientists published a seminal paper that identified the integration of sciences, the implementation of ocean-observing systems, and improved science-policy interfaces, among 6 key strategies to address the dreadful state of ocean health. As the ocean is becoming a new frontier for sustainable development, more and more quality data is needed for policymakers to develop sound disaster response, resource management, and climate adaptation policies. Data is also essential for investors to make informed blue economy investment decisions. However, the marine environment is still inadequately mapped and understood when compared to terrestrial environments. This opportunity is greatest in SIDS, where the Exclusive Economic Zones are on average about 170 times larger than their land area, although technical and financial capacities need to be advanced to support this effort.

Digital advances can revolutionize the rate of ocean data collection and innovation

The OECD has recognized four ocean-related areas of rapid technological advancement: i) ocean sensing and imaging coupled to artificial intelligence, ii) fixed observation platforms and float arrays, iii) autonomy in mobile platforms, and iv) new complex systems integration schemes. These new technologies and the data they will provide have not only the potential to increase the efficiency and sustainability of existing ocean sectors, but also contribute to the identification and creation of new sectors. In fact, adequate data and a better understanding of our oceans will accelerate innovations - including technical, policy, economic and financial - required to transform ocean-related sectors and contribute directly to their sustainable diversification. Such ideas have been burgeoning in SIDS during the last decade and include: the creation of new insurance and financial products designed to protect fishing communities in Fiji and Papua New Guinea, the establishment of a PET plastic recovery and buy-back center in Comoros, the formation of bioplastic utilizing seaweed in the Caribbean, the mapping of coral reef using remotely operated robots and Artificial Intelligence in Barbados, the use of blockchain to trace seafood in Fiji, and the creation of national Extended Producer Responsibility (EPR) scheme for plastics in the Maldives. More importantly, digital technologies have the advantage to eliminate one major challenge of SIDS: geographic dispersion and remoteness. This allows, for example, a better Monitoring, Control, and Surveillance of fisheries through camera systems and electronic monitoring.

Local capacity is needed to formulate and address local priorities

While SIDS share similar challenges, they are heterogeneous in terms of availability of natural resources, levels of economic development, land sizes, and cultures. In addition, they hold significant local indigenous and ecological knowledge that are too often neglected in decision making processes. In order to achieve their blue economy ambitions, SIDS are developing capacity to formulate and solve their own priorities. Such a transition requires an educational and research capacity shift toward relevant nationally-identified environmental, social, and economic challenges. With this approach, SIDS are rising up together to face their difficulties in local expertise to meet national and regional marine sustainable development needs.

Collaboration and partnerships are key for building capacity in SIDS

On average, SIDS spend 14.5 percent of the total government expenditure on general education (European Union, 12.0 percent; North America 13.4 percent). In spite of the remarkable number of innovations in SIDS however, there is still significant potential for increasing expenditure on research reflecting technical and scientific barriers to transformative blue economy action. Collaborations and partnerships play a key role in bridging this gap mainly through the SDG 14.A that specifically encourages the development of research capacity and the transfer of marine technology, in particular to SIDS. This technology transfer should be adapted locally by integrating the rich Local Ecological Knowledge of SIDS, as to promote inclusivity and sustainability.

SIDS are unique - and so are their options for blue financing
Image: Fransisco Blaha

Many SIDS face high levels of debt, linked in part to the cost of reconstruction following natural disasters. In addition, the pandemic’s socio-economic impacts have exacerbated the situation. It is estimated that a 25 percent drop in tourism receipts will result in a USD 7.4 bn or 7.3 percent fall in GDP for SIDS as a group. Such declines in revenue threaten to exacerbate SIDS’ debt burdens as well as depress public investment and recovery responses. In SIDS, tourists' arrival decreased by 77% in 2020 and 64% in 2021, when compared to 2019. The upcoming rebound of tourism offers a great opportunity for SIDS to reimagine the tourism industry and innovative financing options.

What sustainable blue financing options exist in cases of constrained domestic resources?

Green, blue and thematic bonds are in vogue but not appropriate in every situation. Global issuance of thematic debt has proliferated exponentially. According to S&P, total issuances of GSSL (Green, social, sustainable and sustainability-linked) bonds from both public and private issuers amounted to USD 200 billion in 2018. By 2021, this topped US$ 1 trillion!

As of December 2021, 15 out of 20 SIDS rated according to the World Bank and IMF Debt Sustainability Analysis were either in debt distress or at a high risk of debt distress (especially the Pacific SIDS), while another 4 were moderately in distress. Public sector debt (as a percent of GDP) for SIDS has increased from an annual average of 33.8 percent in 2000 to an estimated 73.1 percent at the end of 2021. The average debt for high-income SIDS was 102.7 percent of GDP in 2021, compared to 79.1 percent of GDP for low-income countries. So, while thematic bond issuances are attractive on paper, their suitability must be evaluated before governments look at this option to finance the blue economy. UNDP’s ‘goodness of fit’ tool is an Excel instrument used to evaluate suitability of these debt instruments within national contexts.

If bonds are not the right solution, what else is there to finance the blue economy?

Debt for nature swaps have garnered significant interest in the Seychelles and Belize, but it must be noted that these instruments are slow to structure and the portion of funds flowing back to marine protection directly is only a portion of the total issuance size. The swaps require the buy-in of the creditor(s), which is not granted—many simply do not have appetite to writeoff or forgive debt. Or, they require the government to support an enabling environment for the blue economy: to de-risk ocean investments and integrate the blue economy in national budgets and policy. UNDP can support governments to re-align subsidies with societal values and shift from unsustainable subsidies towards rebuilding natural ocean assets. 

Fiji is one positive example where debt solutions have succeeded: Fiji issued the FJ$100 million Sovereign Green Bond in November 2017 to support climate change mitigation and adaption demonstrating that issuing new debt has a higher preference for ease, speed, and positive market feedback over a debt swap transaction. The blue bond framework for the forthcoming issuance aims to sustainably leverage Fiji’s ocean-based resources to support its post-pandemic recovery and economic diversification in accordance with its National Ocean Policy.

If bonds are not the solution, there are other solutions. In fact, not all capital types are compatible with all blue economy sectors. For example, ecosystem restoration initiatives could mainly be financed by impact only capital like grants. the Commonwealth Secretariat developed an online database to direct member countries towards more than US$170 million of international funding available for ocean-related projects. As the pandemic continues to put pressure on the public finances of many SIDS, it is worth exploring what bonds can offer before access to finance for restructuring maturing debt will become constrained. A successful approach to financing the blue economy in SIDS would be one that blends different types of financing to cover all different needs.
Increasing private sector action for marine biodiversity and climate
Image: Shutterstock
Rapid loss of marine biodiversity is weakening the ocean ecosystem and its ability to withstand disturbances, adapt to climate change, and play its vital role as a global ecological and climate regulator. This is an unimaginable consequence of our failure to reduce emissions and protect one of the planet’s most important natural assets. The situation affects all of us. And especially SIDS which largely depend on marine and coastal biodiversity for their livelihoods.

The upcoming UN Ocean Conference in June and the UN Climate Change Conference (COP 27), will provide a crucial opportunity to break down the siloes between ocean and climate decision making, and advocate for nature-based solutions ocean protection and climate action informed by the latest science. However, good policies alone cannot drive this change. During the last decade, only USD 13 billion was invested in the sustainable ocean economy with very little private investment. For sustainable transformation to take place, the private sector must play a much bigger role.

SIDS are innovating their own future through local and international partnerships with the private sector. Despite their small size in terms of population and land mass, isolation from major markets, and location in disaster-prone regions, SIDS are developing integrated blue economy models that achieve prosperity through sustainable, low emission and climate resilient ocean use that drives economic growth, creates jobs, reduces poverty, improves food security, and supports adaptation to and mitigation of climate change. This approach accounts for the ocean as a vital asset that must be effectively conserved and managed for the future.

Recognising their role in averting the dual nature-climate crisis in SIDS, private sector partners are providing catalytic and investment capital at scale to accelerate the sustainable blue economy transformation and scale up area-based protection and management of ocean ecosystems. De-risked by grants and concessional finance, financial institutions and corporates are working with SIDS in ways that evolve their financial and economic systems; redirect flows from ocean-negative to ocean-positive with climate co-benefits; create and access new market instruments that promote sustainable management; ensure corporate accountability; increase private finance to protect the ocean; and catalyse local ocean-positive enterprises that empower community action and generate tangible benefits for ordinary people.

Sustainable financing is a key enabler in Rising up for SIDS, which prioritises three interconnected pillars - propel blue economies, to enhance climate action, and catalyse digital transformation. By placing natural capital such as marine biodiversity at the centre of sustainable development, nature-based solutions are grounded in cultural and societal values for the protection, conservation and use of ecosystem goods and services.

SIDS are showing us how to secure the benefits of blue economy through PPP. For example, BIOFIN is incentivising governments and the private sector in SIDS to improve biodiversity outcomes by mobilizing innovative national financing for investments that conserve marine and coastal ecosystems. The Global Fund for Coral Reefs is supporting blended finance initiatives that unlock private investment in commercially viable coral-positive businesses that benefit local communities in multiple SIDS including Fiji, The Bahamas and Papua New Guinea. The Ocean Innovation Challenge is also helping SIDS to make progress on SDG14 by identifying, financing, advising and mentoring innovative, entrepreneurial and creative approaches to ocean and coastal restoration and protection.

Through strategic private sector partners, close collaboration with development partners and public-private partnerships, SIDS are building their capacity to recover from shocks, build forward stronger and better, and create sustainable livelihoods for all.
SIDS Perspective
"As Large Ocean States are raising their blue economy ambitions, mainstreaming equity is key in reinforcing the sustainability of the transition."

In this exclusive interview with Peter Thomson, UN Secretary-General's Special Envoy for the Ocean, he shares the opportunities and risks for SIDS to build resilience through their blue economy transformation, the links with innovative financing and digitalization, and the central role of private sector in sustainable livelihoods.

COVID-19 has had devastating impacts on ocean-based economies. How can the blue approach make SIDS economies more resilient to shocks?

SIDS are 35 percent more vulnerable to external economic and financial shocks than other developing countries. They are a special case in development with high debt burden, extreme vulnerability to climate change, remoteness and small populations, along with over-reliance on just a few economic sectors. Sadly, the vulnerability of SIDS has been verified during the COVID-19 pandemic that has seen their economies disproportionately affected. Tourism, which provides more than half of total export revenue in 20 SIDS, has been one of the most hard hit sectors. International tourist' arrivals for SIDS decreased by 77 percent in 2020 and 64 percent in 2021 when compared to 2019. But hopefully, by exposing the fragility of the current development pathways, the pandemic has given SIDS the opportunity to recover better. For going back to 'business as usual' would expose SIDS to future shocks.

By addressing their structural challenges, as Large Ocean States and custodians of 19.1 percent of the world’s Exclusive Economic Zones, SIDS can reimagine their development strategies in more sustainable and diverse forms. A sustainable blue economy transformation, focused on economic growth, jobs and social and inclusion, with a focus on the preservation and restoration of marine ecosystems, can address these challenges. This can be realized through the improvement of the value chain of established sectors, for example seafood processing and ecotourism, and the development of new and emerging blue economy sectors like aquaculture, marine biotechnologies, and marine renewable energy systems. This should be accompanied by measures to ensure that SME have access to technology and financing. The development of sustainable financing tools like impact bonds, debt-swaps, and blended finance mechanisms to accelerate this transformation is well underway. Very importantly, SIDS should be realistic about the sustainability of the new opportunities on offer, in order to avoid past mistakes.

In Large Ocean States, digitalization should go hand in hand with these efforts to open new economic opportunities, for example digital tourism. Digitalization can make distances irrelevant by facilitating data collection, monitoring, and management of areas hundreds of times larger than the land areas.

How can we ensure that the blue economy transformation remains inclusive and benefits local communities?

The High Level Panel for a Sustainable Ocean Economy, has recognized that inequity is a systemic feature of the current ocean economy, wherein benefits are often harnessed by a few, while most harm is borne by the most vulnerable. A hastened growth of ocean-based activities risks accelerating inequity, including the loss of access to natural resources and markets, as well as inequitable sharing of economic benefits from the ocean. This is a particular concern in SIDS, where an average of 30 percent of populations live in zones that are only five meters above sea level, and largely rely on ocean-resources for their livelihoods. Such inequities are more likely to affect women and disadvantaged groups who are highly represented in the informal sectors. As Large Ocean States are raising their blue economy ambitions, mainstreaming equity is key in reinforcing the sustainability of the transition. Considerations to ensure that local communities benefit from the sustainable blue economy and the opportunities it provides include:
  • Adequate social data collection for an informed policy making process
  • Participatory processes, including early involvement in planning and decision-making
  • Recognition of the importance of culture and traditional and local knowledge
  • Equitable economic benefit-sharing

What role can the private sector play in making the blue economy transformation a reality in SIDS?

Investments in capacity, knowledge, innovation, and a healthy marine environment are critical factors for a successful blue economy transformation. Despite the enormous opportunities offered by the extent of their exclusive economic zones, structural challenges, including narrow fiscal spaces, still prevent SIDS from realizing their full sustainable blue economy potential. Official Development Aid and philanthropy alone are not sufficient to fill this gap. In fact, the global financing gap for ocean conservation alone has been estimated at a sobering figure of USD 150 billion per year.

To accelerate the sustainable blue economy transition, it is important that Large Ocean states recognize the role that the private sector, especially small and medium-sized enterprises, can play in job creation, innovation and capacity-building. Examples of entrepreneurs in SIDS are not lacking and include: the development of an underwater robot to collect marine data in the Caribbean, the use of blockchain to trace seafood in the Pacific, or the introduction of innovative financial mechanisms for plastics waste recovery, reuse, and recycling in Comoros.

To further promote and harness this growing potential, SIDS governments must put in place enabling environments. This entails favorable investment frameworks with reliable policies and regulatory regimes to enable sustainable private sector operations and investments.


Harmful marine extractives: deep-sea mining

This UNEP publication is part of a series of briefing papers on harmful marine extractives. It discusses the significant reputational, regulatory, and operational risks associated with plans to mine the deep seabed. The paper addresses how financial institutions should respond to the deep-sea mining sector. Through this paper, UNEP FI sends the following clear message to the finance community: “In their current form, there is no foreseeable way in which the financing of deep-sea mining activities can be viewed as consistent with the Sustainable Blue Economy Finance Principles.

Harmful marine extractives: offshore oil and gas

This UNEP briefing paper addresses the financial risks and environmental impacts associated with the exploration and production of offshore oil and gas. It is designed for banks, insurers, and investors wishing to understand the risks associated with offshore oil and gas activities and wanting to transition away from fossil fuels. In addition to environmental impacts, the paper considers aspects such as financial, reputational, regulatory, operational and physical risks associated with these activities, and discusses how financial institutions should engage with and respond to this sector.

Status and trends of coral reefs and associated coastal habitats in Fiji’s Great Sea Reef

The Great Sea Reef (GSR) region in Fiji stretches across an arc over 450 km and contains over 1,200 km2 of reef systems, including the third-largest barrier reef system in the world. It plays a crucial role in Fijian livelihoods, food security, and cultural identity. This publication reports the results of the most comprehensive ecological survey of the GSR conducted to date and provides 12 management recommendations to improve the condition of its marine ecosystems.

Setting science-based targets in the seafood sector: best practices to date

The seafood sector is a key economic sector for many SIDS. As this industry ambitions a low carbon and sustainable future, this WWF report shares best practices, common challenges, solutions and experiences from the seafood sector to support the industry in establishing Science Based Targets. As the seafood sector works towards a low carbon and sustainable future, collective action across geographies and supply chains will be key to reaching the goals within the Science-based Targets Initiative. 

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