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April 2024 / EQUITIES & FIXED INCOME

Blue bonds: The key to unlocking the blue economy’s potential

Blue bonds provide financing for ocean-friendly or clean water projects in support of the blue economy.

Blue Bonds: The Key to Unlocking the Blue Economy’s Potential

Key Insights

  • Blue bonds provide financing for ocean-friendly or clean water projects in support of the blue economy.
  • Under stress from a variety of sources and severely underfunded, many water resources are in dire need of investment.
  • Blue bonds have emerged as a critical tool in potentially attracting investment into the blue economy and play a part in providing finance to help address the pressing issue of ocean health. 

 

Transcript

The blue economy are activities associated with preserving the health of the world's oceans and using those activities in a sustainable way that develops economies, supports the environment, and improves livelihoods. 

An increasingly important environmental pressure point that we're contending with though is the declining health of the world's oceans.

Let's recall for a second the very important role that oceans play. They generate half our oxygen, absorb 90% of excess heat that's produced by human activity, as well as act as hosts to vital ecosystems.

Yet our oceans are under threat from issues such as climate change, pollution, overfishing, as well as habitat damage, among a host of other pressures.

And this is why governments, policymakers, companies, and communities are collectively seeking ways to support and mobilize investment into the blue economy.

And blue bonds have emerged as an exciting and innovative tool that could potentially help attract and bring forward some of that much-needed investment into the ocean economy.

Blue bonds are debt instruments where proceeds are utilized to finance initiatives, such as providing access to clean water and sanitation, as well as promoting marine conservation and biodiversity to support the health of the world's oceans.

Blue bonds are an exciting and innovative component within the broader sustainable bond market.

Other areas of the sustainable bond market that you might be familiar with would include green bonds, social bonds, sustainability bonds, as well as sustainability-linked bonds.

It is early days, but we see momentum and interest increasingly building for blue bonds across the capital markets.

And blue bonds are important for three reasons: One, issues such as climate change, sustainability, and ocean health are intertwined. And blue bonds have the ability to provide investment to address these pressure points.

Secondly, blue bonds have the capacity to address funding gaps. Take the United Nations [UN] Sustainable Development Goals, for instance. These were 17 goals written by UN member countries designed to protect the planet, promote shared prosperity, and end poverty. And two of those goals, Sustainable Development Goals 6 and 14 are directly tied to water. And unfortunately, these are among 

the most underfunded of the 17 Sustainable Development Goals. So there is a material funding gap that blue bonds can help address.

And lastly, blue bonds have the capacity to drive economic growth on a global scale. The Organisation for Economic Co-operation and Development estimates that the ocean economy could potentially double in size to USD 3 trillion by 2030.

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