First Sentier MUFG unveils investor guide to ocean risks

The First Sentier MUFG Sustainable Investment Institute has launched a new framework for investors to navigate ocean risks and opportunities.

First Sentier MUFG Sustainable Investment Institute director Sudip Hazra said one big gaps they found was in the understanding of financial materiality and portfolio impact of ocean themes.

The framework breaks down these risks including degradation threats such as storms and sea level rise, operational risks such as supply chain disruptions, transition risks as well as reputational risks for consumer-facing business models.

"In the framework we come up with items where a portfolio manager or any kind of investor could look at those risks, help to apply those risks to their portfolio, and really come up with specific outcomes and engagement questions to be able to evaluate and act on those risks better," Hazra said.

Hazra noted we are all getting a free subsidy in terms of natural climate regulation from the ocean and it is not going to be free if we don't maintain it.

"First of all, we would want investors to understand the dependencies within their portfolio holdings on oceans. Secondly, the impacts are obviously very important. What impacts are their companies actually having on the ocean?" he said.

Hazra emphasised investors shouldn't feel overwhelmed by this as something brand new that they have to start from scratch.

"We think there's a lot in investment methodologies around sustainability that already can potentially build in oceans and really requires the extension of current work to extend to oceans as a thematic," he said.

Hazra said the report is broad and specific in its approach with a section being sector agnostic and designed to be top down, where investors can look at the issues regardless of their specific sector or even asset class.

It also identifies ocean dependent sectors such as fisheries, aquaculture, marine transportation, tourism and offshore oil and gas and risks to them.

In terms of adoption, Hazra said one blocker could be psychological.

"I think one of the first blockers is perhaps psychological and sustainable investors already have so much on their plate. One objection might be whether a sustainable investor has resources that they perceive are needed to handle a topic like this," he said.

"One thing we would emphasise is that you don't actually need to be an expert on oceans to be able to integrate it."