Q&A: Developing the Blue Bond Market for Healthy Oceans (2024)

As awareness grows over the critical nature of healthy oceans and seas to our wellbeing and prosperity, we need a common approach to define what comprise blue economy investments. Blue bonds have emerged as a thematic bond that can facilitate capital towards Sustainable Development Goal 14 (life below water) not just through the use of proceeds, but also by making sustainable oceans-related investments more accessible to private and institutional investors.

ADB, the International Finance Corporation (IFC), the International Capital Markets Association (ICMA), United Nations Global Compact (UNGC), and the United Nations Environment Program Finance Initiative (UNEP-FI) have developed a practitioner’s guide aimed at providing the global bond market with consistency and transparency in financing the blue economy. The guide builds on existing market standards that underpin the global sustainable bond markets and draws on pre-existing blue finance guidance.

What is a blue bond?

A blue bond is a relatively new form of a thematic bond where the issuer will use the capital raised to support investments in healthy oceans and blue economies aligned with SDG 14. To give guidance to issuers and investors on which investments could qualify, we have developed this Practitioner's Guide.

How will this guide help in developing the blue bond market?

Funding for oceans has been small, piecemeal, and generally focused on mitigating the impacts of industry. The scale of the problem requires a transition from small deals to transformative market transactions. This guide is for the voluntary use by the market to:

• provide issuers with guidance on the key components involved in launching a credible blue bond;
• aid investors by promoting availability of information to evaluate the environmental impact of their blue bond investments; and
• assist underwriters by offering vital steps that will facilitate transactions that preserve the integrity of the market.

What type of projects are expected to be supported by the blue bond market?

The most common types of projects supported or expected to be supported by the blue bonds are:

1. Coastal climate adaptation and resilience
2. Marine ecosystem management, conservation, and restoration
3. Sustainable coastal and marine tourism
4. Sustainable marine value chains
   • Sustainable marine fisheries management
   • Sustainable aquaculture operations
   • Sustainable downstream operations, including transparency and traceability across supply chains
5. Marine renewable energy
6. Marine pollution
   • Wastewater management
   • Solid waste management
   • Resource efficiency and circular economy
   • Non-point source pollution
7. Sustainable ports
8. Sustainable marine transportation

How is this guidance different from ADB’s Green and Blue Bond Framework?

The guidance draws on the blue components in ADB's Green and Blue Bond Framework, in line with ADB's Ocean Finance Framework as well as guidance from the IFC’s Blue Finance Guidelines, UNEP FI’s Sustainable Blue Economy Finance Principles and practical guidance documents, the UN Global Compact Practical Guidance to Issue a Blue Bond and Sustainable Ocean Principles and guidance documents and the International Capital Market Association (ICMA) global market standards that underpin the global sustainable bond markets.

The guidance further refines:

• the blue economy typology and eligibility criteria,
• key impact indicators, and
• latest case studies in the field.

It also highlights the critical need for increased financing to achieve Sustainable Development Goal 14, and other global sustainability targets.

How did this co-publication come about?

The five organizations identified a need to address greater global market consistency and transparency for financing the blue economy. The commitment to work together was announced by VP Roberta Casali at the UN Ocean Conference in Lisbon from 27 June-1 July 2022 at the Sustainable Blue Economy Investment Forum Special Commitment session.

How is ADB supporting blue bond issuances?

ADB supports blue bond issuances through our Blue Bond Incubator. This includes providing technical assistance to developing member countries and private sector partners to carry out the steps required to issue a blue bond, such as developing a framework and pipeline of projects, securing external verification, and linking to prospective investors. In addition, ADB can, in some cases, provide partial credit guarantees and direct investment in blue bonds issued by partners, subject to market conditions and co-investors.