The competence center for charitable foundations How active engagement can contribute to ocean conservation
Our oceans are the largest natural carbon sink on the planet and the source of economic livelihood for billions of people. However, human activities are continuously destroying our waters. To change direction and protect our oceans, business needs to rethink how it interacts with and uses this precious natural resource. Sustainable investments, such as Credit Suisse Rockefeller Ocean Engagement Fund, which focuses on engagement to drive change, can help to restore ocean health.
Ocean conservation: Economic operators must do their part
With a total economic value of over USD 24 trillion, the world's oceans represent the seventh-largest economy on the planet. Yet, human activities, including waste disposal and energy production, endanger ocean health. Fish populations are declining, coral reefs are bleaching at ever increasing rates, and the sea level is rising. What's more, ocean acidification and plastic pollution are increasingly serious problems. Such factors have led to the creation of more than 500 dead zones where no marine life can survive.
The situation will only improve if we work with global businesses to change how they approach the oceans.
Sustainable investments through shareholder engagement
Sustainable investing offers investors the opportunity to make a financial contribution to companies that, for instance, work to protect the environment. A company's shareholders – such as fund managers, foundations, and pension funds – can use their power as owners to demand improvements in the sustainability performance of the companies in which they hold shares. Besides issuing grants, charities and foundations can incorporate shareholder engagement into their investment strategies.
It used to be common practice to leave voting up to fund managers, but shareholders are increasingly beginning to understand their right of participation as a duty based on their role as owners.
Ocean conservation: How shareholder engagement contributes
Shareholder engagement offers great potential for protecting the oceans. "Many problems of the world's oceans are related to the supply chains of listed companies. One example of that is retailers who supply fish from non-sustainable fishing," says James Gifford, Head of Impact Advisory at Credit Suisse. He adds that, when shareholders exercise their right of participation, right to information, and right of protection, they can actively influence the growth of their companies in which they hold stock, thereby positively affecting the requirements placed on the supply chains.
According to Gifford, businesses are doing most damage to the world's oceans either directly, by overfishing with high-tech fishing fleets and polluting the waters, or indirectly, by producing plastic packaging, for example. However, research shows that fish populations recover when they are not overfished and that the health of the oceans could be restored in only 30 years. "It is therefore quite clearly beneficial to work together with companies to make the oceans healthier," adds Gifford.
The Ocean Engagement Fund is committed to the oceans
In 2020, Credit Suisse, in partnership with Rockefeller Asset Management (RAM), launched the first fund devoted to shareholder engagement for the oceans and sustainability: the Ocean Engagement Fund (OEF). In this context, engagement means active assertion of shareholders' rights on behalf of the fund's owners with the aim of protecting the health of the world's oceans. The OEF establishes a clear connection to the United Nations' Sustainable Development Goal (SDG) 14, "Life below water," one of the goals that is experiencing the least amount of investment.
This new fund provides investors with the opportunity to invest in and engage with companies that are proactively addressing ocean health by focusing on the following issues:
- Reducing waste and preventing plastic pollution.
- Promoting carbon offset and reduction.
- Promoting sustainable fishing practices.
The Ocean Engagement Fund consists of a high-conviction portfolio of 30–50 small and mid-cap stocks. Its strategy focuses on company engagement to improve the condition of the oceans and generate positive alpha – that is, higher returns than expected from general market developments.
Ocean Engagement Fund: The engagement process
Credit Suisse's OEF follows an active engagement process with clear objectives. Before making an investment, the fund evaluates the potential investments' willingness to make a commitment. For example, the fund examines the target company's willingness to communicate with the fund management company as well as its flexibility in reconsidering aspects of its business that are harmful to the oceans and linked to long-term risks.
Engagement activities and results are tracked and reported back to investors on a yearly basis. If the company has made no progress after two years, its shares are sold.