Bonds to Finance the Sustainable Blue Economy: A Practitioners’ Guide

Appetite is growing for ocean-themed bonds that can help develop a sustainable blue economy, says this guidance published by the Asian Development Bank. The voluntary guidelines provide a roadmap for issuers seeking to “access the untapped financial potential of the blue economy” and incorporate blue bonds into their sustainable financing strategies.

The framework builds on existing global green bond standards and provides market participants with clear criteria, practices, indicators, and examples for blue bond issuances and evaluations.

The blue economy encompasses economic activities that “rely or impact on the use of coastal and marine resources”.

The guidelines define a sustainable blue economy as one that maintains, restores and protects diverse, productive and resilient ecosystems; halts the loss of biodiversity; enhances energy efficiency; and reduces carbon emissions and pollution while improving livelihoods and jobs.

Oceans serve as vital heat and carbon sinks, absorbing 31% of carbon dioxide emissions and regulating the global climate. The authors say transition to a sustainable blue economy is “instrumental in achieving the goals of the Paris Agreement”, with blue economy sectors responsible for 21% of required emissions reductions.

Marine environments also provide essential ecosystem services, including being a primary source of protein for 17% of the world’s population. Marine biodiversity loss can therefore have severe consequences on food systems, livelihoods, prosperity and resilience.

Yet marine health is rapidly deteriorating due to what the authors describe as “the triple planetary crisis” of a rapidly changing climate, nature loss and over-exploitation of resources, and pollution.

The development of a sustainable blue economy – including expanding low-carbon aquaculture, environmentally sustainable scaling of offshore renewable energy and decarbonising maritime transport  –  is integral to tackling these crises, say the authors.

A sustainable blue economy is based on clean technologies and circular material flows. Non-renewable extractive industries (such as offshore gas and deep-sea mining) are excluded. Socially and environmentally unsustainable practices, such as involuntary displacement of local communities or endangering protected habitats, are also excluded.

The guidance outlines eight eligible project categories and details how these relate to green bond eligibility criteria:

1. coastal climate adaptation and resilience;
2. marine ecosystem management, conservation and restoration;
3. sustainable coastal and marine tourism;
4. sustainable marine value chains;
5. marine renewable energy;
6. marine pollution;
7. sustainable ports;
8. sustainable marine transport

This non-exhaustive list covers the most common types of projects supported by blue bonds. It also includes examples of activities that should be excluded, project outputs, social co-benefits, and impact indicators.

This guidance is a result of collaboration between the Asian Development Bank (ADB), the International Capital Market Association (ICMA), the International Finance Corporation, the United Nations Environment Programme Finance Initiative (UNEP FI), and the United Nations Global Compact.

The guidelines provide additional thematic guidance which should be used in conjunction with existing market standards that underpin the global sustainable bond markets, such as the ICMA’s green bond principles, the UNEP FI’s sustainable blue economy finance principles and the ADB’s green and blue bond framework.