Blue Finance: How can this innovative wave finance the blue economy?

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Aerial beach view of waves crashing on rocks
Photo: Canva

Our oceans are critical for human existence and a cornerstone of the global economy.  More than 3 billion people rely on the ocean for their food, jobs, and livelihoods. Yet the impacts of climate change, overfishing, and pollution are putting our oceans at great risk, imperiling prosperity for millions in developing countries.  

Protecting the blue economy from these mounting threats isn’t just a moral imperative—it’s a growing financial opportunity. Managed appropriately, it can create a win-win for the environment and the health in emerging market economies. Prior to the COVID-19 pandemic, the ocean economy was expected to double from 2010 to 2030 to reach $3 trillion and employ 40 million people. The financial sector is waking up to the opportunities that a healthy ocean can provide.  It has a critical role to play in pivoting the global economic system towards rebuilding ocean prosperity, restoring biodiversity, and regenerating ocean health.  

The market has already witnessed the exponential growth of sustainable finance and the emergence of diverse instruments based on green or social use-of-proceeds or sustainability targets. Momentum is now building for blue finance among investors, financial institutions, and issuers globally. Blue bonds and blue loans, which are innovative instruments that earmark funds exclusively for ocean-friendly projects and protecting critical clean water resources, are seeing a surge in interest.  

The growth of green and sustainable finance has brought about the introduction of several transparency and integrity principles, including the Green Bond Principles (GBP), administered by the International Capital Markets Association (ICMA), and the Green Loan Principles (GLP) published by the Loan Market Association (LMA). These principles provide examples of what constitute green eligible use of proceeds and have contributed to developing a credible green bond and green loan process. 

However, unlike its labeled bond counterparts, blue bonds and blue loans have not yet adopted and implemented industry standards and guidelines.  

In 2018, the Sustainable Blue Economy Finance Principles launched. These principles consider the sustainable conservation and use of oceans, seas, and marine resources in compliance with Environmental and Risk Management practices such as the IFC Performance Standards. But the market has been seeking guidance on project eligibility criteria, translating general blue economy financing principles into guidelines for blue bond issuances and blue lending.  

Amid this growing interest in scaling blue finance, IFC developed and released new Guidelines for Blue Finance, Guidance for Financing the Blue Economy.  

"Amid this growing interest in scaling blue finance, IFC developed and released new Guidelines for Blue Finance, Guidance for Financing the Blue Economy."

IFC’s Guidelines for Blue Finance aim to provide a list of eligible use of proceeds to support private investments that are not only aligned with the Green Bond Principles and Green Loan Principles but also contribute to the UN’s SDG Goals 6 and 14— “ensure availability and sustainable management of water and sanitation for all,” and “conserve and sustainably use the oceans, seas and marine resources for sustainable development.” In addition, it identifies eligible blue project categories to guide IFC’s investments to support the blue economy.  

IFC will use its guidelines to finance the blue economy and encourage best practices to enable the growth of blue finance globally.   

Check out IFC’s newly released Guidelines for Blue Finance: Guidance for Financing the Blue Economy, building on the Green Bond Principles and the Green Loan Principles.

Authors

Paulo de Bolle

Global Senior Director, Financial Institutions Group, IFC

Join the Conversation

Chemadi
February 11, 2022

As stated above,preservation of oceans has the potential power of strengthening core values that have an impact in economies.The support of blue finance will be vital especially for measures put in place to reach certain targets that will rapidly decrease factors that have hindered growth in the economies.