In this timely research piece, published in May 2022, senior academics in financial law and ocean policy explore the “critical” condition of the global ocean environment due to climate change.
The article presents a benchmark blue finance mechanism that can be used to create stable channels of finance and active investment markets in marine conservation, which the authors say will close the financing gap in the blue economy.
The blue economy refers to aligning economic growth and stability with the sustainable use of ocean resources and preserving marine ecosystem health. The article outlines the vital importance of sustainable ocean governance and conservation for financial and economic stability, due to the central role oceans play in climate change mitigation and, consequently, in reducing climate-related physical shocks.
The article cites earlier research that found that 82% of global carbon deposits are stored in the ocean, highlighting the urgent need to mobilise finance to address deteriorating ocean health.
The authors recommend a legal framework incorporating blue economy principles and provides multi-stakeholder regulatory incentives for financing sustainable ocean governance. This includes national and international regulation designed to facilitate relationships between investment and marine conservation by requiring profitable ocean industry projects to purchase blue bonds, with returns guaranteed by development banks and global funds. It also recommends that blue finance mechanisms are structured to encourage partnerships between private investors, governments, global funds and banks.
Linking sustainability outcomes to profitable ocean activities such as offshore wind will create bankable opportunities that stimulate economic development and, the authors say, allow ocean-related developers to double their profits on returns from a blue bond.
The authors also state that the practical application of a blue finance mechanism requires further steps. In the future, key factors that must be expanded by regulators, researchers and policymakers include the design of financing structures, research and development, data availability and quality, sustainable investment principles, and impact monitoring assessments.
While the authors say that blue finance has lagged behind green finance, they also highlight successful finance initiatives, such as the World Bank’s 2018 multi-donor trust Problue, the Asian Development Bank’s ocean financing initiatives, and the Seychelles’ sovereign blue bond.
With the recent agreement of the UN’s high seas treaty, massive amounts of investment are needed to meet international conservation goals and protect 30% of the world’s oceans by 2030. As a result, designing blue financial mechanisms is an increasingly pressing concern for financial regulators, and this paper provides potential solutions. The treaty, which places international waters into protected areas, passed on 4 March 2023 and establishes a legal mandate for a financial mechanism to fund marine conservation.
This page was last updated March 28, 2023
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