Investing To Protect The Oceans

Through the explosive rise of environmental, social, and governance (ESG) investing in recent years, the “E” in ESG has been almost entirely defined by efforts to address climate and terrestrial problems. Investors wanting to leverage their capital to improve the health of the world’s oceans haven’t had an abundance of options.

But that is finally beginning to change. Some public investments such as new so-called blue bonds—the blue referring to oceans and waterways—and stocks of companies with innovative ocean-protective policies are liquid entry points for investors. Meanwhile, direct private investment options have been opening up for wealthy folks who can tolerate investment lockup periods and high minimum investments.

“ESG and impact investments directly addressing oceans are taking time to develop,” says Justina Lai, chief impact officer at Wetherby Asset Management, a San Francisco wealth management firm specializing in ESG. “But it’s an area that has garnered more interest in the past two or three years as awareness grows.”

Blue Bonds

Among the newest options are blue bonds, whose proceeds are used to fund ocean-related projects aimed at preserving and protecting the environment.

The first issuance was in 2018 by the Republic of the Seychelles to fund sustainable fisheries. More recently, Morgan Stanley underwrote the World Bank’s $10 million issuance of 30-year blue bonds.

“Our goal is to connect capital with solutions, to drive impact around issues of plastic waste,” says Matthew Slovik, head of global sustainable finance for Morgan Stanley, which in 2019 resolved to reduce and prevent 50 million metric tons of plastic waste by 2030.

Critical to the acceleration of change is making impact and ESG investments accessible to average investors. Morgan Stanley is doing its part by offering low minimum investment—$10,000—ESG portfolios that include ocean-supportive investments, Slovik says.

Private Investments

Opportunities are broadest in the private investing arena, where pioneering venture, private equity, and debt funds are channelling capital into companies with innovative ideas for addressing marine challenges.

Among them is Closed Loop Partners, a New York investment firm committed to helping build a circular economy in which products are reused and waste is eliminated before it can reach the oceans. For example, its Closed Loop Venture Fund invests in a Chilean start-up called Algramo, which creates refill stations for household products such as detergent, condiments, rice, and other staples.

Circulate Capital, a Singapore-based private investment company, similarly focuses on plastic reduction in nations including India, the Philippines, Thailand, Vietnam, and Indonesia. Coca-Cola, PepsiCo, and Unilever are among investors in the Circulate Capital Ocean Fund, among whose underlying investments are Ricron Panels, a Gujarat, India-based recycler of plastic waste into materials for furniture and building construction, and Tridi Oasis, an Indonesian converter of PET (polyethylene terephthalate) bottles into flakes used in packaging.

There’s great potential for growth for innovators in the blue economy, says Mark Huang, co-founder and managing director of SeaAhead, which provides a start-up platform for blue innovators and last year launched the Blue Angel Investment Group to connect investors with promising start-ups. The Paris- based Organisation for Economic Cooperation and Development estimates the blue economy will double to $3 trillion by 2030.

Blue Angel’s debut was met with the challenging circumstances created by Covid-19, but by February this year had already doubled its entire 2020 capital. Among its investments: Beta Hatch, a young Seattle firm that creates feed for poultry out of mealworms, replacing the typical feed made from ground fish—a product leading to overfishing in the oceans, Huang says.

The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.

It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.

Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.

The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.

Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.

“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”

When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.

BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.

ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.

Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.

A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.

Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.

“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”

At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.

Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.

Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.

But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.

“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.

Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.

Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.

Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.

“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.

Investing To Protect The Oceans

Why investing in ‘blue-bonds’ could pay.

Selloff in bitcoin and other digital tokens hits crypto-treasury companies.