Capital Market Stir: Blue Bonds grabbing attention and creating a ripple effect
The blue bond market, a financial instrument used to fund marine and ocean-based projects, has seen significant growth since the first blue bond was issued in 2018. By July 2024, the market had grown to approximately U.S.$7.2 billion, with various countries and entities participating.
Countries such as Seychelles, Indonesia, Colombia, Gabon, Belize, and Barbados have employed debt-for-nature swap structures to finance blue projects, including coastal ecotourism, sustainable energy, and marine fisheries management. The Middle East joined the movement in December 2024, with DP World becoming the first company in the region to issue a blue bond. France's Saur Group also entered the market in October 2024, raising EUR 550 million for sustainable water management initiatives.
Blue bonds are considered a sub-type of green or ESG bonds and must be consistent with the project categories of the International Capital Markets Association’s Green Bond Principles (GBPs). They are use-of-proceeds bonds, meaning the funds are earmarked for ocean-related projects.
The United Nations recommends that issuers align their proposed blue bond issuance with existing global standards and blue bond-specific guidance, such as the GBPs. A clear framework and eligibility criteria should be established, specifying how the bond proceeds will be used to finance ocean-related conservation, sustainable fisheries, climate-resilient coastal infrastructure, or other marine ecosystem projects.
A robust governance and risk management system should be developed, often including a dedicated working group responsible for overseeing the bond issuance and management of proceeds. The management of proceeds should be transparent, with a clear system to track allocation and policies for investing any unallocated funds temporarily in liquid and safe instruments.
An independent review or second-party opinion should confirm the bond aligns with recognized blue bond principles or related sustainable/green financing standards. Annual public reporting on the use of proceeds and environmental or social impacts until full allocation is achieved or upon material changes is also essential.
Collaboration with development partners and investment banks, such as UNDP, World Bank, and BNP Paribas, is crucial for structuring and arranging the bond, leveraging their technical expertise and market access. The bond should be aligned with national sustainable development priorities and SDGs, ensuring the instrument mobilizes capital at scale and delivers measurable impacts such as ocean protection and climate resilience.
Issuers should develop a framework that sets a "blue baseline", sets clear targets, and regularly discloses sustainability performance metrics. Investors in blue bonds include high-net-worth individuals, venture capital firms, and investment banks.
The Republic of Seychelles launched the first-ever "blue bond" in 2018, raising U.S.$15 million for marine protected areas and fisheries governance. As the blue bond market continues to grow, it is expected to play a crucial role in addressing the underfunding of SDG 14 (life below water) and contributing to the doubling of the blue economy by 2030, creating 40 million jobs and making it the eighth largest economy in the world, with an asset value estimated at US$24 trillion.
The implementation of sustainable solutions within the marine industry requires funding, and the blue bond market is seen as a sustainable solution for financing projects within the marine industry. The framework should consider the UN’s Sustainable Ocean Principles and the Ocean Stewardship 2030 report, which provides a roadmap for a healthy and productive ocean by 2030.
As climate change becomes an increasingly pressing global matter, the growth of the blue bond market is expected to continue. The key steps for issuing a blue bond according to United Nations-related practices ensure transparency, impact focus, and alignment with ocean sustainability goals.
- In alignment with global standards, countries are employing debt-for-nature swap structures in the blue bond market, like Seychelles and others, such as Indonesia, Colombia, Gabon, Belize, and Barbados, for financing projects related to coastal ecotourism, sustainable energy, marine fisheries management, and more, to counteract the effects of climate change on marine ecosystems.
- By investing in blue bonds, high-net-worth individuals, venture capital firms, and investment banks are supporting ocean conservation and climate-resilient initiatives, with the hope of meeting the United Nations' Sustainable Development Goal 14 (life below water) and contributing to the doubling of the blue economy by 2030, creating 40 million jobs and making it the eighth largest economy in the world, with an asset value estimated at US$24 trillion.
- To ensure the blue bond market continues to grow and address the underfunding of SDG 14, collaborations with development partners and investment banks like UNDP, World Bank, and BNP Paribas are essential, as their expertise and market access help structure and arrange blue bonds that are aligned with national sustainable development priorities and SDGs, enhancing the ocean's health, productivity, and climate resilience.
