On the sidelines of the UN Ocean Conference in Lisbon, IFC, a member of the World Bank Group, together with four of the top international organizations have announced their commitment to develop guidelines that would provide the global market consistency and transparency in financing the blue economy.
IFC, the International Capital Markets Association (ICMA), United Nations Global Compact, United Nations Environment Program Finance Initiative (UNEP FI), and the Asian Development Bank (ADB) are partnering to develop a global practitioner’s guide for bonds to finance the sustainable blue economy. It will aim to provide market participants with clear criteria, practices, and examples for blue bond lending and issuances. The five organizations are currently seeking further input from the financial markets, ocean industry and global institutions with the goal of producing the final edition in Autumn 2022.
ICMA provided the standards underpinning the global sustainable bond market with the Green and Social Bond Principles, the Sustainability Bond Guidelines, and the Sustainability-linked Bond Principles. In 2021 98% of all sustainable bonds issued globally, were aligned to these principles. ICMA principles enable the issuance of blue-labeled bonds, but until now, blue issuers have not had access to global guidance for how to apply them for blue bonds. This has resulted in market fragmentation, investor hesitation, and slow growth of blue finance.
The Global Guidance on Blue Bonds synthesizes ICMA principles, 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, alongside the IFC’s Guidelines for Blue Finance. Building on this foundation, the global guidance document further refines the blue economy typology and eligibility criteria, key performance indicators, and provides the latest case studies in the field. It highlights the critical need for increased financing to achieve Sustainable Development Goal 14, which encompasses a diverse range of sectors and project types.
“IFC recognizes how important it is to work together with ICMA, ADB, UNEP-FI, and UN Global Compact to provide the market a cohesive guidance on blue project eligibility criteria, blue bond issuances, and blue finance,” says Paulo de Bolle, Senior Global Director, Financial Institutions Group, IFC. “To support a healthy, sustainable, and growing blue economy we need support from the financial and private sector and internationally recognized guidance helps build investor confidence and catalyze investments,” de Bolle added.
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. Despite this size current investment falls far below what is needed to transition this to a Sustainable Blue Economy.
“Blue finance offers tremendous opportunities in closing the blue financing gap and support a thriving sustainable blue economy,” says de Bolle. “Specifically, blue bonds are emerging as an innovative instrument with increased interest from investors, financial institutions, and issuers globally.”
IFC Leadership in Blue Finance
IFC is working with financial institution clients, corporates, partners, and other development finance institutions to develop a systematic global blue economy finance market. In the early part of 2022, IFC launched the Guidelines for Blue Finance. It provides market participants guidance on eligible use of proceeds for private investments to build the blue economy and is the first set of guidelines introduced globally that builds on ICMA’s Green Bond Principles and the Loan Market Association’s Green Loan Principles.
IFC has also pioneered investments in blue finance with the key partners leading to several ‘first in the market transactions. These include IFC’s subscription of up to $100 million in the first blue bond in the Philippines issued by BDO Unibank, and the first blue bond by a commercial bank in Thailand issued by TMBThanachart Bank (TTB). IFC also anchored and mobilized a $300 million blue loan for Thailand’s Indorama Ventures – IFC’s first ever blue loan exclusively focused on addressing marine plastic pollution.
Since 2020, IFC has provided more than $400 million in blue loans and bonds to investors and issuers globally, recognizing the untapped potential for clients to grow their blue financing products and services, and to develop a systematic global blue finance market.