Invest in UN SDG 14: Life Below Water with ESG ETFs

The United Nations Sustainable Development Goals (SDGs) are 17 goals that all UN Member nations have agreed to achieve by 2030. They set out an ambitious mission to eradicate issues that affect our society and environment. Life Below Water has a central place in the UN's agenda through its SDG #14 “Conserve and sustainably use the oceans, seas and marine resources for sustainable development" and underpinned by 10 ambitious targets. In this article, we highlight how you can contribute to UN SDG Goal 14: Life Below Water with ESG Exchange-Traded Funds (ETFs).

17 SDGs for a better future

The Sustainable Development Goals (SDGs) are 17 goals with 169 targets set by the United Nations in 2015 as a global initiative to tackle issues that affect humans and the environment we live in, with the hope of achieving tremendous progress by 2030.

The 17 sustainable development goals (SDGs) to transform our world:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation, and Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to Achieve the Goal

Each goal has several targets and is measured quantitatively by indicators provided by private and public entities. The creativity, know-how, technology, and financial resources from all stakeholders are necessary to achieve the SDGs in every context. The beauty of these goals is their interrelation, meaning that action in one area will affect outcomes in others. The development of those goals must balance social, economic, and environmental sustainability.

To fully meet the 17 Sustainable Development Goals, the United Nations Conference on Trade and Development (UNCTAD) estimates that an investment of $3.9 trillion is needed on average each year from 2015 to 2030 for the developing nations alone.

What is UN SDG GOAL #14: Life Below Water?

Oceans are the source of life on the planet and the global climate system regulator. They are essential for making the planet livable. Rainwater, drinking water, and climate are all regulated by ocean temperatures and currents. The ocean absorbs around 23% of annual CO2 emissions generated by human activity and helps mitigate the impacts of climate change. The ocean also helps absorb more than 90% of the excess heat in the climate system.

Over 3 billion people depend on marine life. According to the Food and Agriculture Organization (FAO), marine fisheries provide 57 million jobs globally and provide the primary source of protein to over 50% of the population in the least developed countries.

Human activities (mainly since the industrial revolution) have been detrimental to oceans and maritime life. According to the United Nations, there’s been a 26% increase in acidification since the industrial revolution — threatening marine environments and ecosystem services. Coastal areas, home to almost 40% of the worlds’ population are facing growing risks from eutrophication – excess nutrient loading into coastal environments resulting from human activities. The number of dead zones worldwide – areas of water that lack sufficient oxygen to support marine life – increased from around 400 in 2008 to approximately 700 in 2019.

An estimated 5 to 12 million metric tonnes of plastic enter the ocean every year — costing roughly $13 billion per year – including clean-up costs and financial losses in fisheries and other industries.

According to the 2020 report on progress towards the Sustainable Development Goals, the current efforts to protect oceans, marine environments, and small-scale fishers are not meeting the need to protect the resources. On average, only 1.2% of national research budgets were allocated to ocean science between 2013 and 2017, with amounts ranging from 0.02% to 9.5%. This represents a small proportion in view of the OECD's estimation of the $1.5 trillion year contribution of the ocean to the global economy.

Sustainable Development Goal #14 is a wake-up call for nations, organizations, and individuals to conserve and sustainably use the oceans, seas, and marine resources for sustainable development.

SDG #14 has 10 targets set for completion by 2030:

1. Reduce marine pollution
2. Protect and restore ecosystems
3. Reduce ocean acidification
4. Sustainable fishing
5. Conserve coastal and marine areas
6. End subsidies contributing to overfishing
7. Increase the economic benefits from the sustainable use of marine resources
8. Increase scientific knowledge, research, and technology for ocean health
9. Support small scall fishers
10. Implement and enforce international sea law

To track progress, the United Nations along with all other involved stakeholders have established 10 statistical indicators attached to each target. It helps parties adapt and improve actions toward making the goal attainable by 2030. These indicators can be tracked on the SDG Tracker.

Investors can promote Life Below Water with ESG ETFs

Today, impact investing has become the norm, with billions of dollars injected in the market in adequately screened investments, focusing on entities that align their activities with SDG and ESG initiatives (Environmental, Social, Governance). Corporate Social Responsibility departments (CSR) went from being a cost burden to an existential necessity that represents employees' and consumers' values.

The change in investors' mindsets has given birth to mutual funds and ETFs that provide exposure to securities that work towards achieving ESG or SDG goals. It allows them to invest in opportunities that can provide wealth accumulation while making an impact.

List of ESG ETFs promoting Life Below Water SDG

Trackinsight analyzes the fact sheets and other publicly available information of all ETFs in the ESG universe. The information is screened for statements that show an explicit tilt towards specific Sustainable Development Goals. In relation to the "Life Below Water" goal, Trackinsight identifies 2 ETFs totaling $193 million in assets.

ETFs supporting SDG #14

• BNP Paribas Easy ECPI Global ESG Blue Economy UCITS ETF (BLUE) - $187 million
• IQ Clean Oceans ETF (OCEN) - $5 million

BNP Paribas Easy ECPI Global ESG Blue Economy UCITS ETF

The BNP Paribas Easy ECPI Global ESG Blue Economy UCITS ETF or BLUE is a passively managed fund that seeks to replicate the performance of the ECPI Global ESG Blue Economy (NR) Index. The fund provides exposure to companies with positive ESG ratings — engaged in the sustainable use of ocean resources (coastal protection, eco-tourism, recycling, human capital, corporate governance, etc.). Companies involved in sectors with a potentially high negative ESG impact, those subject to significant violations of the UN Global Compact principles and those involved in severe ESG-related controversies — are excluded.

The fund's latest fact sheet (December 31st, 2021) shows that the United States (19.8%) has the highest allocation, followed by Japan (9.18%), Germany (9.13%), United Kingdom (8.39%), France (8.13%), Norway (7.35%), Spain (7.01%) and Netherland (6.27%). In terms of sectors, Industrials (52.2%) has the biggest slice. Next in line are Utilities (22.13%), Consumer Staples (13.25%), Basic Materials (6.41%), and Others (6%).

As of January 28th, 2022, the leading 10 names include Ingersoll Rand Inc. (2.43%), Republic Services Inc. (2.41%), Hapag Lloyd AG (2.33%), Koninklijke DSM NV (2.32%), Waste Management Inc. (2.31%), Relx PLC (2.25%), Waste Connections Inc. (2.24%), Veolia Environnement SA (2.18%), Toyo Suisan Kaisha Ltd. (2.17%), and Spirax-Sarco Engineering PLC (2.17%). Combined, they represent 23% of the fund's portfolio

Since its inception on September 14th, 2020, the fund has generated +37.7% in cumulative returns. BLUE has a total expense ratio of 0.3% and trades on multiple European exchanges, including Euronext Paris (BLUE, EUR), Deutsche Börse Xetra (BJLE, EUR), and Borsa Italiana (OCEAN, EUR).

IQ Clean Oceans ETF

The OCEN IQ Clean Oceans ETF tracks the IQ Candriam Clean Oceans Index and provides exposure to companies that help to protect and/or achieve cleaner oceans through reduced pollution and increased resource efficiency.

As of year-end 2021, the portfolio's country allocations are spread across the United States (38.9%), France (10.7%), Germany (10.7%), Denmark (6.4%), Japan (6%), Spain (3.3%), Hong Kong (3.2%), Switzerland (2.9%) and South Korea (2.7%).

As for sectors, Information technology has the highest exposure (22.9%), followed by Industrials (21%), Utilities (16.2%), Consumer Staples (14.2%), Consumer Discretionary (13.1%), and Materials (12.3%).

On January 28th, 2022, the top 10 portfolio holdings (79) included Procter & Gamble (3.5%), Iberdrola SA (3.2%), Lowe's Companies (3.0%), Texas Instruments (3.0%), Siemens AG (3.0%), Microsoft Corp. (3.0%), Kimberly-Clark Corporation (3.0%), Home Deport Inc. (2.9%) and L'Oréal (2.9%).

OCEN has a total expense ratio of 0.46% and trades on the NYSE Arca. Since its inception on October 21st, 2021, the fund has generated an average annual total return of +4.31%. Meanwhile, the index has generated an average annual total return of +16.84% since its inception on June 23rd, 2017.

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