Exploring Blue Bonds potential to support the Ocean Economy

May 3, 2022

Photo: UNDP / Storyblock license

Have you ever heard about blue bonds? An innovative asset class that funds commitments towards oceans, water-related initiatives and sustainability, this finance mechanism has potential to scale-up the blue economy. Blue bonds can be issued by sovereign governments, the private sector, or by multilateral banks. They can cover investments across a wide range of sectors and economic activities that impact ocean health and focus on areas related to marine and coastal management and sustainable development.

Despite their relatively small landmass, Pacific Island Countries (PICs) have some of the largest national ocean areas (Exclusive Economic Zones) in the world. Spanning millions of square kilometers, these ocean areas are the single largest asset for PICs and there is strong interest to sustainably lever these assets to build blue economies. Blue economy sectors range from fisheries, aquaculture/mariculture, renewable energy, shipping, waste management, tourism, marine protection, and more. However, viable solutions are needed to sustainably finance the blue economy transformation. A blue bond helps ring in much-needed private sector and development partner finance through debt financing to support blue economy investments.

The side event “Blue Bonds: An innovative tool to finance the Sustainable Ocean Economy”, held in the margins of the 7th Our Oceans Conference in Palau, brought together Pacific actors and stakeholders, including UNDP, Fiji Ministry of Economy, the Asian Development Bank, the UN Global Compact, to discuss the potential of blue bonds and provide case studies of successful blue bond initiatives.

The discussion included an inspiring speech by Maya Delaney, Youth Climate Ambassador from the Bahamas, who explained the importance of scale-up investment into ocean and coastal resilience. It also included the contribution of Leah Gutierrez, Director General of Pacific Regional Department for the Asian Development Bank (ADB), who launched the new initiative ADB Blue Bond Incubator. She said “Ocean investments are key to building resilient communities and economies, and the ADB Blue Bond Incubator will grow the blue economies at scale”.

The sovereign blue bonds perspective was shared by the Fijian Attorney General, Minister for Economy and Minister responsible for Climate Change Aiyaz Sayed-Khaiyum, and Palau’s Minister of Finance Kaleb Udui, Jr. 

Hon. Aiyaz Sayed-Khaiyum at the Our Ocean Palau 2022 Conference. (Photo: UNDP)

Palau’s Minister of Finance, Hon. Kaleb Udui, Jr. and UNDP Pacific Office in Fiji Resident Representative, Levan Bouadze (Photo: UNDP)

UNDP Pacific Office Resident Representative in Fiji, Levan Bouadze, highlighted the potential of blue bonds in fostering the blue and ocean economy. While blue bonds are a powerful instrument that can attract investors, recipient governments need to have systems in place that can ensure a sustainable impact, including a developed ocean policy, a reliable banking sector, a pipeline of projects lined up and developed economies such as tourism and fisheries. Blue bonds can support the blue economy and have a positive impact on the environment, building on existing assets, such as fisheries and tourism, and creating a viable and sustainable economy.

He explained how UNDP is currently working to support Fiji in developing its first blue bond, including providing blue economy assessments, and policy support for blue economy.

In order to improve transparency and attract the private sector, issuers must however adopt taxonomies on sustainable economic activities that define criteria for classifying investments as sustainable.

UNDP Pacific Office in Fiji Resident Representative, Levan Bouadze. (Photo: UNDP)

Panelists at the Our Oceans Palau 2022 Conference (Photo: UNDP)