[Column] Rajnish Aubeelucka: Mauritius oil spill: Our oceans need more than protection, they need investment
Usually bustling with sunburnt tourists, beaches on the island of Mauritius are empty this year. COVID-19 forced Mauritius to close its borders to tourists in March 2020, then another disaster struck.
In July, a shipping vessel ran aground on the island's south-eastern coast and discharged more than 1000 tonnes of oil into the surrounding ocean, which included a nature reserve. The International Monetary Fund (IMF) expected that the COVID-induced decline in tourism will see the Mauritian economy shrink by a staggering 14.2% in 2020.
The long-term impact of the oil spill on Mauritius's coral reefs and coastal ecosystem is more difficult to quantify, but according to experts, just as severe. It not only drew international media attention but also led to serious public outcries among Mauritians.
While it is important to demand accountability for environmental disasters, attention to a single shocking event like this often overshadows the degradation of marine ecosystems that continues around the world every day. The true and greater disaster is how climate change, pollution, overfishing, and the destruction of marine and coastal habitats continue to threaten our oceans.
The urgent need to address these long-term issues is recognised by the United Nations (UN) Sustainable Development Goal number 14, which aims to "conserve and sustainably use the ocean, seas and marine resources for sustainable development".
The UN defines the blue economy as "an ocean economy that aims at "the improvement of human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. As such, it is interlinked with many of the other SDGs in a variety of ways, as aquatic and marine resources play a crucial role in supporting an array of economic sectors that provide livelihoods and employment opportunities to end poverty (SDG 1).
Currently, only 60% of the SDG financing needs are addressed in emerging and developing regions, and this figure is as low as 10% in Africa. Standard Chartered estimates that the private sector investment opportunity to contribute to just three of the most tangible, infrastructure-focused goals – SDG 6: Clean Water and Sanitation, SDG 7: Affordable and Clean Energy and SDG 9: Industry, Innovation and Infrastructure – already amounts to nearly US$10 trillion.
Africa's share of this amount is significant. For example, Kenya and Nigeria presents investment opportunities of US$40 billion and US$114.2 billion, respectively. Even Uganda, a much smaller African economy, offers an opportunity of US$13.7 billion. Standard Chartered believes our unique footprint allows us to help address this problem. We see supporting sustainable and responsible growth, including delivering the SDGs and specifically SDG 14, as a significant opportunity.
The impact of COVID-19 in Mauritius provides a prime example of how heavily island economies rely on ocean-related tourism, but the "blue economy" also makes an important contribution to many other African economies through activities like fishing, aquaculture and maritime trade. Mauritius is one of ten African coastal and island economies in the Indian Ocean.
A 2017 report prepared by the Boston Consulting Group (BCG) calculated the "gross marine product" of this region to be at least US$20.8 billion, while the value of its total "ocean asset base" is at least US$333.8 billion. Earlier research published by the United Nations Economic Commission for Africa (UNECA) found that fishing and aquaculture alone contributed 1.3% of Africa's total GDP in 2011.
According to the Food and Agriculture Organization (FAO), freshwater and ocean fish also make a vital contribution to the food and nutritional security of over 200 million Africans.
Although marine conservation and pollution – especially through tons of plastic waste permeating our oceans – have received much more attention in recent years, a much greater amount of investment will be necessary to meaningfully enhance sustainable marine development. Investors have only just started to wake up to the opportunities presented by the blue economy. A survey conducted by Responsible Investor last year found that nine out of ten institutional investors are interested in financing the sustainable ocean economy, although blue finance is at present largely confined to the niche of impact investing.
In February last year, the African Union launched its Africa Blue Economy Strategy, recognising that the blue economy can be a major contributor to the continental transformation, sustainable economic progress, and social development. However, to realise these ideals, both public and private capital are needed to address the immense challenges faced by our oceans. This calls for innovative financial products such as blended finance, in which public and private partners pool funds to share investment risk.
In 2018, Standard Chartered launched the world's first sovereign blue bond for the Republic of Seychelles, in partnership with the World Bank.
This was a key moment in the development of blue finance and proved that there are great opportunities for debt instruments to raise blue capital. The sector now needs to build on the learnings from this project to help blue finance mature and grow.
Critical to this development will be putting in place guidelines by regulators to support the development of framework for potential issuers of sustainable instruments. The guidelines should cover best practices and create greater clarity and agreement on what exactly constitutes a blue finance investment.
Transparency and best practice in terms of the monitoring and evaluation of blue investments will also play an important role in developing the sector and helping to attract more investors.
Along with such a framework and guidelines, it is important that sustainable finance products are adequately regulated and supervised by the respective in-country regulators. This will ensure that the minimum standards of impact reporting on investments are met, to give the investor community greater confidence in these products.
Reporting standards should be aligned to best practice in the industry and the SDGs. Boards should also play an important role in adhering to Environmental, Social and Governance (ESG) standards when making decisions and in reporting.
Earlier in 2020, Standard Chartered signed a memorandum of understanding with the Government of Mauritius to develop a sustainable finance framework that will allow the structuring of green, blue and sustainable bonds as well as other relevant financial instruments that will help mobilise financing for projects (infrastructure, transport, power) that support economic growth while taking into account ESG criteria.
Mauritius, as the only investment grade International Financial Centre in sub-Saharan Africa, can position itself as a sustainable finance hub for the continent by helping promoters raise project finance through both the debt capital market in Mauritius, as well the banking system.
The island's financial services industry is sophisticated and has the capacity to collaborate with international service providers and institutions to support sustainable finance for Africa. Mauritius can lead the way in adopting sustainable finance to become a reference for other countries in Africa.
The Mauritius disaster came in a year that experts expected to be an "ocean super year". Unfortunately, COVID-19 pushed back what were expected to be landmark conferences to help blue finance gain traction. As we look to 2021, Standard Chartered remains committed to helping blue finance regain the momentum it needs to turn the tide on the sustainability of our oceans.
Rajnish Aubeeluck is the Head of Global Banking at Standard Chartered Bank Mauritius