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.

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.

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. 

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.

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.

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!

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.

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.

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

• 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.