Blue bonds are a type of green bond that focuses on the betterment of marine resources. Blue bonds can be used to finance projects with adaptation benefits, such as the restoration of mangrove forests (which also has mitigation benefits), the expansion of marine protected areas, improved water management, and flood risk reduction. To date, the most common objective of these bonds is to finance marine and ocean projects by directing bond proceeds to support ocean health and blue economies.
The guidelines for blue bonds, released in 2023 by the International Finance Corporation and the Asian Development Bank, provide information on the components of launching a blue bond and identify blue project categories and key impact indicators. The blue project categories that can meet climate change adaptation objectives include
- coastal climate adaptation and resilience – “projects that support ecological and community resilience and adaptation to climate change including nature-based solutions” (primary contribution to adaptation objective);
- marine pollution (secondary contribution to adaptation objective);
- marine ecosystem management, conservation, and restoration (tertiary contribution to adaptation objective);
- sustainable marine value chains (tertiary contribution to adaptation objective); and
- sustainable ports (tertiary contribution to adaptation objective). (Asian Development Bank & International Finance Corporation, 2023)
Some debt-for-nature swaps have combined debt relief with a blue bond structure.
Current or potential adaptation-relevant sector applications:
- crop and food production – fisheries (marine, freshwater, and aquaculture);
- coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
- ecological services and management – wetlands; ecosystem and biodiversity protection, conservation, and enhancement; and
- water supply (infrastructure) – water storage; water harvesting; water management.
Additional insights:
- This is an emerging instrument, with the first sovereign blue bond issued in 2018.
- Blue bond transactions reached a total of USD 5 billion between 2018 and 2022.
Considerations for issuing blue bonds:
- A robust pipeline of blue projects is needed for proceeds from the blue bond to fund.
- Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
- Guarantees may be needed to increase investors’ confidence in blue bonds issued in developing countries.
Adapted from the following sources:
Asian Development Bank. (2021). Green and blue bond framework. https://www.adb.org/sites/default/files/publication/731026/adb-green-blue-bond-framework.pdf
Asian Development Bank & International Finance Corporation. (2023). Bonds to finance the sustainable blue economy: A practitioner’s guide. International Capital Market Association, United Nations Environment Programme Finance Initiative, and United Nations Global Compact. https://www.adb.org/publications/bonds-finance-sustainable-blue-economy-practitioners-guide