Making a splash: Launching the global practitioner’s guide for bonds to finance the sustainable blue economy

On 6 September 2023, The International Capital Market Association (ICMA) together with the International Finance Corporation (IFC) – a member of the World Bank Group, United Nations Global Compact (UN Global Compact), United Nations Environment Programme Finance Initiative (UNEP FI), and the Asian Development Bank (ADB) have developed a global practitioner's guide for bonds to finance the sustainable blue economy (Blue Bond Guidance).

We have previously discussed the Blue Bond Guidance while it was in its consultative draft phase here.

The development of a sustainable blue economy, including preventing the decline of marine fisheries, the expansion of low-carbon aquaculture, the scaling of offshore renewable energy and the decarbonization of maritime transport is integral to tackling the triple planetary crisis of a rapidly changing climate, nature loss, and pollution. The ocean serves as a vital heat and carbon sink, absorbing about 31% of the carbon dioxide emissions released and regulating the global climate.

The Blue Bond Guidance builds on existing market standards that underpin the global sustainable bond markets such as the Green Bond Principles and also draws on pre-existing specific blue guidance: UNEP FI's Sustainable Blue Economy Finance Principles and associated Blue Finance Guidance, the UN Global Compact's Practical Guidance to Issue a Blue Bond and Sustainable Ocean Principles, the Asian Development Bank's Ocean Finance Framework and Green and Blue Bond Framework, and the IFC's Guidelines for Blue Finance.

This voluntary Blue Bond Guidance is for broad use by the market to:

• provide issuers with guidance on the key components involved in launching a credible “blue bond”;
• aid investors by promoting availability of information to evaluate the environmental impact of their “blue bond” investments; and
• assist underwriters by offering vital steps that will facilitate transactions that preserve the integrity of the market.

The Blue Bond Guidance will act as additional thematic guidance on use of proceed bonds such as green bonds or sustainability bonds to finance projects supporting the Sustainable Blue Economy and ocean health. It also points to the possible use of sustainability-linked bonds incorporating blue key performance indicators.

The new global guidance helps to:

• define blue economy typology and eligibility criteria;
• suggest key performance indicators;
• showcase latest case studies from the field; and
• highlight the critical need for increased financing to achieve Sustainable Development Goal 14, and other global sustainability targets.

The Blue Bond Guidance provides much needed support to help scale up investment in blue bonds and build investor confidence. It is important that the ocean community and the finance community have a shared understanding of the meaning of “blue” to encourage long-term partnerships between these sectors. The Blue Bond Guidance provides clear guidance on indicative categories and considerations for eligible blue projects. In turn, this will promote shared ocean literacy and will help to bridge the gap between industry and investors, leading to greater scaling up of ocean investment as we have seen with other thematic bonds.

We expect more ocean-related issuances will refer to, and align with, the Blue Bond Guidance. Having a clear standard for blue bonds will encourage a pipeline of bankable blue investments and facilitate more blue issuances to promote a sustainable blue economy.

As investors continue to show interest in thematic bonds, there is substantial potential for blue bonds to have a transformative effect on ocean economies. It is hoped the Blue Bond Guidance will help create a market standard for blue issuances going forward, providing issuers and investors with much needed clarity on the parameters of ocean investments.

To learn more about the role of sustainable finance in the ocean economy, you can read our article Shades of blue in financing: Transforming the ocean economy with blue bonds here.

If you are interested in understanding how ocean finance and the Blue Bond Guidance could be relevant to you, please reach out to the authors: Joywin Mathew and Claire Robertson.