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IFC: Sustaining the Future of our Blue Economy



The Blue Economy represents the sustainable utilization of ocean resources while preserving marine ecosystems—an integral part of the Paris Agreement. Valued at approximately US$24 trillion, the Blue Economy is projected to double to US$3 trillion by 2030, generating 40 million jobs and ranking as the world's eighth-largest economy, according to the International Finance Corporation (IFC). However, the environmental challenges remains evident, with over 10 billion tons of plastic in oceans, 30% of fisheries operating unsustainably, and 2 billion people lacking clean water access. The prevailing unsustainable resource utilization requires the urgent need for a shift toward more responsible practices. In this context, “blue bonds” can be a pivotal tool in preserving these critical carbon sinks.


THE IMPORTANCE OF BLUE BOND IN DRIVING BLUE ECONOMY

The investment in Sustainable Development Goals (SDG) 6 (Clean Water and Sanitation) and 14 (Life Below Water) remains limited. Recognizing this gap, the International Finance Corporation (IFC), renowned for its expertise in green bonds—financial instruments designed to raise funds for environmentally beneficial projects—has ventured into the realm of blue bonds. This innovative financial instrument serves as a thematic bond, channeling capital toward SDG 6 and 14. It achieves this not only through the use of proceeds but also by facilitating access for private and institutional investors to support sustainable ocean-related investments. Blue bonds specifically target projects related to sustainable ocean and water management, promoting clean water access, marine conservation efforts, and initiatives fostering healthier marine ecosystems. These investments often fuel research and innovation in technologies that contribute to the sustainable utilization of marine resources, such as the development of renewable energy derived from the ocean.


THE NEED FOR CLEAR GUIDELINES FOR BLUE BONDS

The innovative concept of blue bonds requires concrete guidance for measurable outcomes and enhanced investor confidence. Collaborative efforts between the private sector and institutions like IFC and the International Capital Market Association (ICMA) are crucial. In 2022, they have been working together to provide this guidance, establishing criteria for what projects qualify for blue bonds and how they align with goals like SDG 6 and 14. Earlier this year, a coalition involving IFC, ADB (Asian Development Bank), United Nations Environment Programme Finance Initiative (UNEP FI), UN Global Compact, and ICMA developed a comprehensive global practitioner's guidance on blue bonds, providing information on the key components involved in launching a credible blue bond, how to evaluate the environmental impact of blue bond investments; and the steps needed to facilitate transactions that preserve the integrity of the market. The aim is to boost investor confidence and drive investments aligning with the SDGs.


The vast potential of blue bonds lies in their capacity to fuel a sustainable ocean economy, vital for navigating challenges like climate change, resource depletion, and insufficient management. To fully realize this potential, promoting blue bonds as a significant means of funding is essential. This requires a concerted effort, involving collaboration among the private sector, institutions, and international organizations. By setting high standards and empowering investments in sustainable ocean-related projects, this collaborative approach can effectively steer us toward a more resilient and thriving future for our oceans and planet.



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