Green Finance Advisor of Friends of the Earth (HK)

Environmental risks continued to dominate the headline news and extreme weather has been the risk of greatest concern for a very long time. Climate change and the unsustainable use of marine resources are detrimental to the habitats of oceans and those whose livelihood rely on the bio diversity of marine life. In additional to the Green Finance, Blue Economy, especially Blue Bonds are likely to attract more interest and perhaps be the next frontier of some coastal countries’ development.

Blue bonds are debt instrument issued by governments, sovereigns, development banks to raise capital for projects with marine or ocean-based benefits. Blue Bonds aim to deliver financing to support a rage of environmental, social, and economic issues facing the marine sector.  The blue bond support programs of marine and ocean-related activities, financing the implementation of sustainable development goals on marine life as well as the transition towards a sustainable blue economy with a strengthened blue natural capital at its core.

The Aim of Blue Bond and the United Nations Sustainable Development Goals (SDGs)

The United Nations Sustainable Development Goals (SDGs) are becoming more influential as an organizing framework for many investors; private and public investors who are keen to look for a thematic investment approach, are also eager to align their investment strategy with the SDGs. In essence, there are 17 SDGs outlined by the UN, and in the context of Blue Bonds, SDG 14 (Conserve and sustainably use the oceans, seas and marine resources for sustainable development) is the most relevant in relation to contributing to good governance of the ocean and costal habits, deliver long term value to the ecosystem, reduce carbon emission or strengthen resilient livelihoods of people who depend on oceans and their resources in a changing climate. In particular the targets of this goal also emphasis on:

  • Reduce ocean acidification and pollution of all kinds
  • Restore ocean ecosystems
  • Support sustainable fisheries
  • End overfishing [1]

Seychelles Blue Bond

In October 2018,  with the support of the World Bank, the Government of Seychelles issued the world’s first sovereign blue bond and raised USD 15 million to support marine and ocean-based projects contributing positive environmental, economic and climate benefits to the Islands Nation. The Government of Seychelles recognized the need to build and sustain its use of fish stocks through proper government and management of the sector.  The Seychelles Blue Bond attracted interests amongst institutional and private investors who desire to take a bigger role to ensure the sustainable use of ocean and marine resources. Oceans are under increasing environmental stress, ranging from pollution to conversation of marine life.

Nordic-Baltic Blue Bond

In January 2019, a SEK 2 billion bond was also launched by the Nordic Investment Bank supporting water projects around the Baltic Sea and along the Nordic coastline.  The Nordic-Baltic Blue Bond targets at investors that are conscious of challenges facing the region’s water resources and it is also the first Blue Bond to attract impact investment in Baltic Sea Protection.  The issuance of the bond was a huge success and well received by investors, The bond was twice oversubscribed and in the end 21 investors participated in the issue.

Proceeds of Blue Bonds

Under the Seychelles bond, the proceeds from the transaction will be used to support the extension of marine protected areas, bolster governance of priority fisheries and the development of the Seychelles’ blue economy.  The beneficiaries of the proceeds will be local communities, civil society organizations and businesses who are seeking financing for activities that can support a transition to sustainable fisheries[2].

Similar to the Seychelles Bond, the new NIB from the Nordic- Baltic region targeted at investors who want to help protect the sensitive marine environment in the Baltic Sea and launched its first blue bond in February 2019.    Unlike the Seychelles Bond which emphasised on the remedial of overfishing and restore ecosystem, the Nordic-Baltic Blue Bond was renowned of its support to sewage management, reduction of water pollution and water-related measures coupled to climate change.  One of the most notable project supported by the Nordic-Baltic Blue Bone was the Nya Slussen project in Stockholm.  This project did not only provide clean transport solutions at the Slussen traffic hub, but also redevelop the Slussen water locks.  The expansion of the water locks increased the drainage capacity and accommodate higher floodgates by adding two larger water channels beside the locks.  The Nya Slussen redevelopment is critical to the flooding mitigation measure that will enable Stockholm and the Malar region to better prepare for and adopt to the effects of rising sea levels and more extreme weather conditions in the future.

Conclusion

As coastal ecosystems are increasingly recognized for their important role in balancing carbon emission and thereby mitigating the effects of climate change, it is expected that investment of a particular focus on climate changes and marine life will becoming more popular.  With the raving success of the Nordic-Baltic Blue Bond, it is further confirmed that investors have growing interest to use blue bonds for conversation and environment mitigation measure.  Furthermore, the blue economy is of growing importance and blue bonds offer an opportunity for private sector capital to be deployed to support sustainable investment.

[1] https://www.4climate.com/dev/wp-content/uploads/2019/04/Blue-Bonds_final.pdf

[2] https://www.credit-suisse.com/about-us-news/en/articles/news-and-expertise/ocean-preservation-and-sustainable-investing-202006.html


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