Generating opportunities

In this interview, Markus Müller, Deutsche Bank Private Bank's Chief Investment Officer ESG, explains why the term 'blue economy' is nothing new and how the financial sector can become fit for a nature-compliant future.

An interview with Markus Müller
Photographs by Thomas Horig, Jordan Robins, Kimberly Jeffries, Michele Roux, Stefan Andrews, The Ocean Agency I Ocean Image Bank

Oceanographic: What does the term ‘blue economy’ stand for? What does it entail?

Markus Müller: For me, it’s surprising that the world is celebrating the term blue economy as something new. It’s nothing new, right? It’s a term that has existed since humanity has existed. I’ve quoted it somewhere, it’s from a book: that we as creatures or a species stand at the edge between land and maritime world, so for us, this shouldn’t be anything alien. But I think, based on the discussion about the change in our climate, the change caused by changes in the atmosphere, humanity also started to be more worried about the biodiversity and the other aspects of the world, which I call life pillars – the atmosphere, the land, as well as the maritime world. In this context, they have become more conscious that there is an entire economy around the ocean.

90% of global trade is shipped through the ocean. Around 3 billion people in the world depend on wild-caught and farmed seafood as a primary source of protein and many others depend indirectly on ecosystem services provided by the ocean. The mega cities of this world, I think eight out of 10 lie next to coastlines. I think this consciousness elevated the term ‘blue economy’. When I think about the next steps and what we really should focus on, it’s about the sustainable and equitable blue economy. How can we get something which has already existed since mankind existed transformed into something which is sustainable and equitable?

Oceanographic: How can the financial sector and business in general become more sustainable and fit for a nature-compliant future?

Markus Müller: It starts, I think, with being aware of what businesses are doing and what they have in their value chain. This is very, very important. I’m not sure how well it is known, be it by investors or by the companies itself, how far-reaching value chains are. If you take a textile company, for instance, you would rather think about it in a terrestrial context. But it also has a potential negative impact on the ocean, hence a tie to the blue economy. I think this is an important knowledge. Point number one: You need to be aware of your value chain.

Point number two: You need to be aware of the impact of your value chain towards the world you’re embedded in, and then you can steer it in various directions. And then point number three: We should understand how dependent the world really is on all the services the ocean and the blue economy deliver to us. It’s not just purely about the economic activity like trade. You also need to think about, for example, pharmaceutical products that are made from some of the resources we have in the ocean, as well as the ocean’s ability to regulate/mitigate climate change or weather. This is very important. Furthermore, from a security perspective, the ocean is important to us. A healthy ocean must be taken into account as an adaptation measure to climate change; coral reefs are natural breakwaters with healthy coral reefs found to reduce incoming wave energy by as much as 97%. If coral reefs are depleting, the ability to protect life on land against the power of mother nature will be lost in extreme weather events.

It’s about how we can better understand what the role of the ocean economy is and why it is so important to us. And if we turn this into a positive story, then we can say that being aware of this translates into being aware of the risk associated with degradation of nature. At the same time, we can generate opportunities while taking this into consideration. This, in turn, means that communities or individuals who are currently working in sectors of the blue economy that are not sustainable could as well really have an important role to play in making them equitable. As an example: A big chunk of individuals working in the fishery context are women. Women are paid less than men and I think this is a very good example of showcasing why putting a focus on a sustainable and equitable economy is so important.

Oceanographic: What conditions are needed for a sustainable blue economy to prosper and grow in the future?

Markus Müller: First of all, we need to really understand the system which currently exists. And then we need to understand what harms the ocean and what doesn’t harm the ocean in order to change. We really have to start with the current activities (the status quo of our economic system) and change these activities towards ocean and nature-positive compliance. It’s very, very important. Secondly, although I like the various new projects we see popping up around the world about kelp or sea grass restoration, my question always is: How do the thousands of kelp projects really help us? We need to keep the ocean intact, right? And we need to keep it intact in the form we know it. While local restoration activities are absolutely important and need to be encouraged, we need to take a holistic and systemic approach at how we deal with the ocean and the economic activities that depend on and impact it. We should not make the same mistakes with the ocean, as we’ve made with the terrestrial world. We shouldn’t overload it with our hope, with our desire to see this as a kind of last frontier. Rather, let’s do everything in our power not to mess it up. We already use a lot of the ocean and this means that we have to take care of it like a rare egg.

Oceanographic: If we were to monetise the ocean fully, as you said, what are the negative factors that we need to think about in advance and how can it look in concrete terms?

Markus Müller: The word ‘monetise’ always makes me a little bit nervous in the financial market context, because monetising, for me, means extracting benefits out of an asset and getting monetary compensations for it. Instead, we should see the ocean as a source of value or as a valuable source which delivers ecosystem services, which we then can monetise. Rather than the asset, the focus must be on ecosystem services and assigning them their true value. But we need to keep the stock intact and its value (i.e. the asset) in order to deliver these ongoing ecosystem services. Secondly, I think once we have built this understanding about the value of the ocean and the importance of its ecosystem services, we can start taking this into account in our financing but also economic decision-making processes.

One interesting project is done by the University of Perth, which is called the Global Ocean Accounting Programme. I think this is very, very important. For me, it goes into the direction of assigning the correct value to Natural Capital, similar to the System for Environmental Economic Accounting of the United Nations. Let’s give the value to nature it has in order to make sure that we don’t deplete it to guarantee and enhance the high quality and quantity of ecosystem services we are all dependent on.

Oceanographic: So, where can individuals start? Where can they invest? What do they need to look out for?

Markus Müller: I would say we need to have a new enlightenment about Nature. As I have just also written in a post for COP, we need to know more about Nature. The anthropologist Elizabeth Povinelli calls it literacy of nature. And for me, as someone born in the countryside, I was fortunate to grow up with a reasonable knowledge about the animals and plants. There was this interesting Guardian article a couple of years ago where they conducted a survey among kids. They found that they know more about Pikachu than about a badger. I don’t want to exaggerate these examples, but I think this is important for all of us. We need to really go back to where we’re coming from.

Last but not least, we also need to be aware of the problem which has caused this distance between humans and Nature. It was something that, at the same time, brought us to the current prosperity level in the developed world – the Industrial Revolution. It brought us so much prosperity, so much wealth through technological development. But at the same time, it broadened value chains so that we often do not know where products come from anymore. We do not know what labour is needed anymore to produce them. We do not know what natural resources are needed to create these good which we then consume. I think for the individual this is very important to be conscious about.

I don’t believe that individuals are guilty. An individual isn’t guilty. It’s rather the sum of collective action. We created the problem together. It’s not one individual which creates a problem; it’s the intensity of our entire consumption or behaviour. No one is doing this, I think, based on a bad behaviour, or bad intention. It is rather the information or knowledge which is needed that is not available. Changing this is a long process and this will happen through collective knowledge accumulation. This knowledge accumulation is this much-needed enlightenment about the importance of nature as our foundation.

I think in the financial market context, first of all, we need to kickstart a new kind of literacy or enlightenment about finance and financial instruments. We should not see economics or finance as a goal. We have always believed that if we have reached or closed the finance gap, everything will be fine. Now, this is not granted, right? It’s just closing something, but we need to understand why we use economics. Economics is a tool to help us answer questions and finance is a tool to get things changed in whatever direction. We need to understand for what purpose we use what.

I always use three examples. If you want to create a Marine Protected Area, it is very difficult to allocate the positive benefits coming out of this marine protected area to one agent or nation. Is it the Ivory Coast who has created this or is it further south in Africa? Is it in Portugal? So, who can we attribute this positive economic benefit of a Marine Protected Area when the fish stock is recovering and benefits are widespread? Well, you can’t really allocate this positive economic return to the Marine Protected Area itself, so you create an incentive in the financial market to encourage recognition and protection of nature which benefits the wider ecosystem. This means this is a topic for philanthropists or for public finance, for governmental finance. Then you have on the other extreme maybe a company who wants to create a nature-compliant harbour or wants to increase its finance in shipping practises that are compliant to a sustainable blue economy. They can do it via a sustainability bond because the economic goal of it is very, very clear and you can precisely say how it will work. And then you have something in the middle, which is for instance, something like Belize did, using nature as collateral. This is then blended finance. So, you have a variety of different tools in finance, from public finance to bonds to public-private finance. All of these have completely different goals. But the underlying incentive should be always to protect nature.

I think this is a second point: We need to understand the use of finance, based on questions economics has helped us answer. Thirdly, from an investor’s point of view, they need to understand what this means. An investor needs to look at the corporate strategy, how a corporate strategy is taking these things into account, the value chains, for instance, the negative impacts of the value chain, but also reporting on it and saying how to fulfil the next steps, much like a climate report. It is so important to understand how a company is achieving its transition goals. Because for me as an investor, it would be a risk if someone wouldn’t be able to tell me by when they would like to achieve net zero or carbon neutrality. It’s important. This is what we need to know as investors to form an opinion on whether to invest in such a company or not.

Lastly, also to touch on carbon credits or biodiversity credits, which brings me back to the first thing, we need to understand for what purpose these credits are meant for. I’m here more or less in the same camp as Partha Dasgupta, a British economist. He didn’t explicitly focus on credits, but he said in his report that we need to find a mechanism to finance our Global Commons (the High Seas, the Atmosphere, Antarctica and Outer space), where countries that host these commons can really benefit from instead of logging the Congo basin, for example, and destroying the great Nature-based Solutions for combatting climate change. What does it mean? In the biodiversity or carbon credit context, we should see the credits as a kind of claim or trade of property rights. That countries who are not currently able to stick to the NDCs or to their commitments could buy such claims and so that monetary flows can be used to finance the active positive nature management for the natural assets that can generate the credits in order to keep our Global Commons intact. But they must retire over time, these credits. It is not for me the case that credits should be traded among companies. For me, it’s really just the entity which can use nature as a collateral and do what’s needed to be done in order to preserve this collateral.

Oceanographic: How’s the Deutsche Bank involved or what projects are you currently working on?

Markus Müller: What we’ve done over the last years is trying to understand the subject matter first. Of course, there were many opportunities where we could have acted very early on. But for us, it was rather important to understand the foundations. Hence, we joined the Ocean Risk and Action Alliance and the United Nations Ocean Decade Committee in Germany. We are collaborating within the different initiatives on group level, which has helped us really to understand the ‘why’ better than anything else. And now we are ready for going into the ‘what’. The ‘what’ means that we have now also installed an Advisory Panel on Nature at group level. This will help us to bake Nature into our decision-making processes, to understand the metrics we have to use, and the risks we need to know.

Additionally, what we’ve done is we have been active in philanthropic activities. For example, we’ve been supporting the Future Climate Coral Bank in the Maldives because we really believe in this activity and the importance of Nature-based Solutions. We’re also very clear in our investors’ engagements. We like to share our knowledge with investors, and we invite them to give up their knowledge about these things.  We’ve been heavily focusing on exclusionary approaches on the investment sides so far. But nonetheless, I think by having the Nature Advisory Panel in place, by having real policies formulating our view, we as the Deutsche Bank as a whole really can be part of the solution.



Photographs by Thomas Horig, Jordan Robins, Kimberly Jeffries, Michele Roux, Stefan Andrews, The Ocean Agency I Ocean Image Bank

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