How Wealth Advisors Can Help Their Clients Navigate Ocean Sustainability
Thursday, June 8, 2023
June 2023
How Wealth Advisors Can Help Their Clients Navigate Ocean Sustainability

Company impacts on oceans and incorporating conservation into investment portfolios

By Travis Korte

When Alaska government officials canceled the snow crab season in 2022, following a rapid population decline from about 12 billion crabs to about 1 billion in just four years, it wasn’t immediately clear what had caused the collapse. Although warming sea temperatures worsened by climate change were eventually identified as the main culprit, overfishing, infectious pathogens, and reduced food sources were also considered. A major reason events like this are so hard to diagnose is that oceans are complicated. Marine ecosystems are deeply intertwined with the rest of the biosphere and with humanity; they support lives and livelihoods in nearly every part of the world, but they also bear an enormous burden from a wide range of human activities. 

This year, for World Ocean Day, we wanted to share some of our work on making sense of company impacts on ocean ecosystem resilience and offer guidance for incorporating ocean conservation into investment portfolios.

What Makes Oceans So Complicated?

Part of the challenge of caring for Earth’s oceans and the people who depend on them is that oceans aren’t closed systems. They’re influenced by phenomena in the air, on land, and in the rivers and streams that drain into them. In turn, ocean conditions affect the global climate, human and animal migration patterns, and the macroeconomic environment far from the shore. So understanding ocean phenomena like acidification, nutrient cycling, and chemical pollution means thinking about topics we might normally consider “land-based,” like agricultural practices, industrial processes, and materials supply chains. For example, nitrogen and phosphorus, important for plant growth and widely used as fertilizers, can wash out from farms when it rains and make their way into oceans, where they can cause algae blooms that kill marine wildlife and disrupt food webs. 

Another challenge is coordinating global efforts to better care for oceans and the species that depend on them. Oceans are international, so it’s not enough for people in some countries to value them while people in other countries abuse them. For example, although many nations might agree that reducing microplastic pollution in the world’s oceans ought to be a policy priority, the exact mechanism, the “how,” can quickly become contentious. Many companies in economically richer countries export trash — in particular, plastic trash — to poorer countries, where some of it can be recycled, but much of it ends up as pollution in land and freshwater systems. In recent years, however, some of these poorer countries have restricted this trade, citing local environmental harms and acknowledging they have been exploited by wealthier nations. 

Ocean conservation is a global project, and although there have been some promising recent developments, the intersection of a planet’s worth of values, needs, and interests only compounds the already complex ecological situation. Coming to an international agreement on what needs to be done, even if we all agree in principle on the problems, means doing the hard work of reconciling disparate communities that have unique relationships with the seas and with one another.

How Do We Break the Issue Down?

If we want to be better stewards of Earth’s oceans, it’s not enough to think only about what’s in the water; we have to think about what’s above, below, and around it and who has a stake in it. In Ethic's Biodiversity & Ecosystems Pillar, we consider company impacts on the planet, including ocean ecosystems. And because oceans are complex for all the reasons discussed above, we’ve sought to break the issue down in a way that respects the complexity while still being approachable to clients with various levels of expertise in the topic. Out of all the research literature we reviewed in developing the pillar, one framework stands out for its balance of simplicity and rigor.

The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), a multilateral organization that provides policymakers with scientific advice on biodiversity and ecosystems issues, details five categories of “direct drivers” of ecosystem change: climate change, pollution, land/sea-use change, natural resource use and exploitation, and invasive species introduction. We’ve taken this taxonomy and used it to identify company behaviors we believe are relevant to an oceans-focused portfolio.

Climate Change

Pollution

  • Ocean impacts include eutrophication and the bioaccumulation of hazardous materials in organisms
  • Relevant company behaviors include hazardous waste disposal, packaging waste disposal (including plastic waste), air pollution emissions, and water pollution effluents

Land/Sea-Use Change

Natural Resource Use And Exploitation

Invasive Species Introduction

Although there can be no single metric to identify companies with substantial negative impacts on oceans, we’ve found that the IPBES framework is straightforward enough to explain to clients while still being firmly grounded in the best available evidence on ocean ecosystem impacts. 

How Can Wealth Advisors Serve Ocean-Conscious Clients?

So what does this mean for advising your ocean-conscious clients? Quite simply, it means thinking more deeply about how the companies your clients own are impacting the world’s oceans. That cruise line they’ve invested in may be transmitting invasive species, or those agricultural companies they’ve invested in may not have adequate chemical risk controls for their fertilizers.

Want to learn more about how to advise your ocean-conscious clients? Ask your Ethic relationship manager for our Biodiversity & Ecosystems Pillar Overview and Pillar Fact Sheet documents.

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Sources and footnotes

Ethic Inc. is a Registered Investment Adviser located in New York, NY. Registration of an investment adviser does not imply any level of skill or training. Information pertaining to Ethic Inc’s registration or to obtain a copy of Ethic Inc.’s current written disclosure statement discussing Ethic Inc.’s business operations, services and fees is available on the SEC’s Investment Adviser Public Information website –www.adviserinfo.sec.gov or from Ethic Inc. upon written request at support@ethicinvesting.com. Information provided herein is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Any subsequent, direct communication by Ethic Inc. with a prospective client shall be conducted by a representative of Ethic Inc. that is either registered or qualifies for an exemption or exclusion from registration in the state where a prospective client resides. Information contained herein may be carefully compiled from third-party sources that Ethic Inc. believes to be reliable, but Ethic Inc. cannot guarantee the accuracy of any third-party information.

Ethic Inc. does not render any legal, accounting, or tax advice. Ethic Inc. recommends all investors seek out the services of competent professionals in any of the aforementioned areas. Ethic Inc. cannot provide any assurances that any investment strategies, simulations, etc. will perform as described in our materials. ALL INVESTMENTS INVOLVE RISK, ARE NOT GUARANTEED, AND MAY LOSE VALUE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY.

Contributors

Travis Korte is the associate director of Sustainability Research & Data at Ethic. Previously, Travis organized civic-minded technologists at Hack for LA and advised a wide range of clients on data science, data policy, and quantitative methods. You can follow him on Twitter at @traviskorte.

Melissa Banigan is a content strategist with over 15 years of communications experience working with global companies and nonprofits. Also a journalist and author, her work appears in The Washington Post, CNN, the BBC, NPR, and the Independent, among other publications, and she's written three books for youth.