A deep dive with the UN’s Joint SDG Fund on sustainable investment opportunities to tackle the ocean crisis

At COP26, the UNs Joint STG fund hosted a panel event to discuss how to unlock both public and private capital to help tackle the growing ocean conservation crisis. It warned that the integrity of oceans is at significant risk due to ocean management policy and market failures leading to overexploitation, pollution, introduction of invasive species, habitat loss and ocean acidification. Panelist Jasper Smith, founder of Vala Capital, explained how a potential ground-breaking collaboration that brings together non-profit venture philanthropy with for-profit venture capital could help close the catastrophic $150bn shortfall in funding for ocean conservation.

“The ocean is our largest ecosystem by far, covering some 70 per cent of the planet. It really is our planet’s life support system. It is fundamental to our climate, absorbing around 30 per cent of all of the man-made CO2 we produce and more than 90 per cent of the excess heat we create. But that’s not all. The blue economy is estimated to be worth around $3trn, with a connected workforce of around 200 million.

The ocean is gravely ill, its chemical balance and average temperature have changed, pollution, overfishing, industrial runoffs and the melting of ice sheets further endanger the balance of this critical ecosystem.

“We are super proud to be talking to the UN SDG Fund about bringing together finance, business, and charity organisations in blended finance solutions” – Jasper Smith

Yet, for many people, human connection with the ocean is lost. Oceans are abstract for most of us – we don’t see the overfishing or the acidification. But whichever way you look the ocean it is not only critical to addressing global warming, but also in supporting hundreds of millions of livelihoods in the developing world. Yet the ocean has so far been catastrophically underfunded as a collective ecosystem. The UN’s Social Development Goal (SDG) 14, which aims to protect, restore and sustainably manage shared oceans and coastal ecosystems, is the most underfunded of all of the UN 17 SDGs, despite the ocean being the largest, most connected and vital ecosystem on earth.

From a venture capital perspective, less than half of 1 per cent of all global venture capital money goes into ocean-based developments and ventures. And if you look at it on philanthropic basis, again only around 0.5 per cent of all philanthropic capital globally is allocated to ocean-based conservation issues.

My background as an entrepreneur has been trying to kick down the doors of VCs, and most often being told no, and then as a VC, trying to allocate money to entrepreneurs and saying no myself. And finally, as a philanthropist I’ve been trying to give money away, and I’ve often found that surprisingly difficult too! It has enabled me to think about a whole new set of parameters for people like me and for the communities in which I operate.

Blended finance
It has led me to what we believe is a potential solution – blended-finance, the bringing together of non-profit venture philanthropy with for-profit venture capital. It is an approach we already use at Vala – where we’ve financed companies using philanthropic capital initially, growing into ventures that can be funded through VCs.

For example, one of our portfolio companies is Arksen – an adventure marine adventure company that’s building offshore vessels that can be used for pleasure, but more importantly, can be used for science. The aim of that business is to create one of the largest private platforms for marine research. The Sustainability Group is another business that we started using blended finance. It provides a platform called FuturePlus that monitors mentors and supports these businesses as they try and embark or transition towards sustainable practices.

Blended finance is composed of two components –­ a ‘non-profit’ sustainable business incubator and ‘for-profit’ venture capital fund. The incubator component would be funded by philanthropic donations made to 10% For the Ocean, a global platform for ocean venture philanthropy formed as an alliance of the most impactful ocean conservation and sustainable development projects around the world. It currently consists of more than 50 organisations working on 600-plus projects across more than 30 countries worldwide. 10% For the Ocean would provide ‘non-profit’ seed grants via the UN country programmes for sustainable marine projects that are capable of being turned in to commercial ventures.

The second component, Vala Capital, the ‘for profit’ element, would then seek to invest those projects that have the potential to become scalable and commercial investment propositions in a proposed new venture capital fund backed by private capital, funded by pension funds, family offices and high-net worth investors.

As it stands return on investment is looked at in absolute financial terms by the VC community. There’s no concept of a return on investment and biodiversity that’s baked into our investment thesis particularly around the oceans. When we look at that market and those sectors, whether it’s philanthropic capital or whether it’s ‘for profit’, entrepreneurs are the lifeblood of innovation – they are the agents of change that we need to support. There is a fundamental need to ensure that the capital systems that we’ve got, particularly in non-OECD countries, are designed to really target, focus and support those entrepreneurs, the people that we need the most to help save our planet.

Everywhere you look, whether it’s venture capital, philanthropic giving, national and government funding pools, there is a catastrophic lack of funding for oceans. Whilst that funding gap exists, conservation projects or early sustainable development projects will have little chance of creating the scale that they need to help promote systemic change in the way that we preserve and use our oceans.

We believe a blended finance approach, or commercial and philanthropic capital working in lockstep with governments and the Joint SDG Fund can raise capital globally and at scale and subsequently significantly tackle the SDG funding gap. If successful, this is a powerful template to roll out across other SDGs facing similar challenges.”

Jasper Smith, Founder and CEO, Vala Capital.

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