I have exciting news to share: You can now read OceanESG in the new Substack app for iPhone.
With the app, you’ll have a dedicated Inbox for my Substack and any others you subscribe to. It’s a big upgrade to the reading experience.
It’s Over…
Sure, some $300+ billion sits in ESG funds, but if you read any news this week you would find out that it is over.
After all, just weeks ago we left COP 26 feeling quite smug in our (modest) green ambitions. Now it’s drill baby drill.
And I just got here. Dang.
Haters gotta hate. Generalizers gotta (over)generalize.
I’ve never claimed that ESG is perfect.
In fact, it was the obvious shortcomings that led me to dive deeper into this segment of the market.
Clearly there are differences in investments, holdings and strategies among ESG funds.
First, the divestment theme ran its course. Now, a more active approach is taking hold.
The goal is to push companies to be, well, less shitty.
And that less-shittyness may insulate investors from unexpected financial catastrophes in the future.
Don’t Forget the ‘G’
The ‘G’ in ESG stands for ‘Governance’.
A lot of investor protection can fall under the banner of good governance.
Filtering investments on governance criteria may have saved investors from being exposed to Russia in the first place.
There are asset managers out there who avoid China for the same reason.
The reasons for ESG are economic, and arguably have always been a part of risk management in investing.
Well, even though it’s over, I’ll just go ahead and share what I think is important to the ocean economy anyway.
The Ocean 5
The five key sectors that make up the ocean economy include shipping, ports, seafood (fisheries and aquaculture), ocean energy (ocean renewables and offshore oil and gas), and coastal and marine tourism.
Here are some news stories that caught my eye in these key segments:
Energy
The energy transition is all about commodities, and this week the nickel market broke.
So what?
Nickel is a critical component in batteries, including those for EVs.
It is estimated that this move alone could add $1,000 to the cost of a Tesla.
As the illiquid futures market was squeezed, prices shot to over $100,000.
But the chart only goes to $50k.
Oh yeah, the London Metals Exchange (LME) took the extreme (and extremely ridiculous) step of actually canceling trades (speaking of governance)!
As you may have guessed, Russia has something to do with this. Russia supplies about 7% of the global market for nickel.
Shipping and Ports
The shipping industry is practically begging for a higher carbon price, preferably in the form of a fuel tax. It is wild to hear execs calling to be taxed more.
However, these companies are trying to make 30-year investments in fleets, infrastructure, and the fuels of the future.
The bunker tax is needed to level the playing field with higher-cost green fuels.
This effort took a step forward in the EU, although a global industry requires a global solution.
Your ball, IMO.
Tourism
Sourcing seafood responsibly, improving on the 3 R’s (reduce, reuse, recycle), caring for and restoring the natural resources they depend on. Seems like a reasonable game plan.
Is this the future of sustainable tourism?
Seafood
The confluence of warm water events (see The Blob, 2014) and starfish disease (decimating the predator) has led to an explosion of sea urchins in certain areas of California’s coast.
And sea urchins love kelp. LOVE it.
This imbalance has led to devastation of the kelp forests where only 5% remain in some areas.
It’s also a study in what happens when the top of the food chain is removed (see sharks, tuna, whales, etc).
The question is, who’s hungry for purple urchin?
Something To Watch
Insane footage of recent floods in Australia.
Something To Listen To
The ocean economy isn’t all seaweed and surfing.
The discussion linked below (recorded just before the Ukraine invasion) highlights the challenges facing a rapid energy transition as well as what sectors will benefit from a more nationalistic approach to the energy transition and manufacturing (spoiler alert: railroads).
I highly recommend having a listen.
+ Eric Mandelblatt: Investing in the industrial economy - Invest Like The Best
Some Encouragement
When it comes to climate and investing, we could all use some Endurance.
Have a great weekend, ride a bike, and thanks for reading.
Doug