Cleo Hanna
AcrossLimits
As environmental sustainability becomes an increasingly pressing global issue, a new frontier in finance is emerging: blue finance. This innovative approach to investing prioritises the health of our oceans, recognising their critical role in supporting global ecosystems, economies, and climate regulation. Blue finance encompasses a range of financial tools and investments aimed at protecting and sustainably using ocean resources, promoting economic growth, and addressing the adverse impacts of climate change.
The Importance of Ocean Health
Oceans cover over 70% of the Earth’s surface and are vital to human survival. They provide food, regulate climate, and support a rich diversity of life. Additionally, oceans are integral to the global economy, with industries such as fishing, shipping, tourism, and marine biotechnology relying heavily on healthy marine ecosystems. Despite their importance, oceans are under severe threat from overfishing, pollution, habitat destruction, and climate change. Addressing these challenges requires substantial financial investment and innovative solutions.
What is Blue Finance?
Blue finance refers to the mobilization of capital towards projects and businesses that contribute to the sustainable management and conservation of ocean and coastal resources. It aims to balance economic growth with environmental protection, ensuring that marine ecosystems remain healthy and productive for future generations. Blue finance involves various financial instruments, including blue bonds, impact investing, venture capital, and microfinance, each designed to address specific aspects of ocean sustainability.
How the idea of Blue economy was born?
The concept of a “blue economy” emerged in the early 2000s, born from the growing global commitment to sustainable development principles. The term itself was introduced by Gunter Pauli, a Belgian entrepreneur and advocate for sustainability, in his 2011 publication, Belgian entrepreneur and sustainability advocate, is credited with popularizing the term in his 2011 book, “The Blue Economy: 10 Years, 100 Innovations, 100 Million Jobs” (Smith-Godfrey, 2016).
Pauli envisioned a new economic model based on sustainable ocean resource use. He argued that the oceans’ untapped potential could address climate change, energy scarcity, and poverty. Inspired by natural ecosystems, his model aimed to create value from waste and by-products, fostering economic growth in sectors like aquaculture, renewable energy, and biotechnology while promoting environmental and promoting social equity. (Pauli, 2011)
This concept, rooted in earlier initiatives like the 1992 UNCED, aligns with UN Sustainable Development Goals, focusing on marine conservation supported from organizations like the UN and the World Bank, and is now a key driver of sustainable development, aligning with the SDGs, especially SDG 14 (Rees et al., 2018).
- Blue Bonds: Pioneering Financial Instruments
One of the primary mechanisms of blue finance is the issuance of blue bonds. These financial instruments raise capital specifically for initiatives that benefit ocean health. Blue bonds are similar to green bonds, which fund environmental projects, but are focused on marine and coastal ecosystems. By providing long-term funding, blue bonds help ensure that these projects can achieve their conservation and economic goals. Moreover, they offer investors a way to support environmental sustainability while earning a financial return.
Seychelles Case
The Seychelles was a pioneer in this area, issuing the first blue bond in 2018 to support sustainable fisheries and marine protection. The bond raised $15 million to support the transition to sustainable fisheries and the expansion of marine protected areas. The World Bank assisted in developing the blue bond and reaching out to the three investors: Calvert Impact Capital, Nuveen, and U.S. Headquartered Prudential Financial, Inc. The proceeds are used to provide loans to local fishers and finance projects that enhance marine conservation. This initiative demonstrates the potential for blue bonds to attract investment and drive meaningful change in ocean management.
Impact and Outcomes:
- Establishment of new marine protected areas covering 400,000 square kilometers.
- Support for sustainable fishing practices, benefiting over 200 local fishers.
- Strengthening of the Seychelles’ blue economy and marine biodiversity.
“Coral Bonds”
Another initiative from 2024, was the set-up of the “Coral Bond”, a financing instrument aimed at enhancing marine biodiversity conservation. This bond seeks to positively impact over 5 million hectares of marine protected areas (#MPAs) in Indonesia, home to some of the world’s most biodiverse coral reefs. Partners include the World Bank, Government of Indonesia, IUCN, Global Environment Facility, and BNP Paribas. This initiative will not only safeguard marine life but also bolster Indonesia’s economy by enhancing fisheries and tourism, offering a sustainable model for future conservation efforts.
- Blue Investments
Blue finance investment funds play a crucial role in mobilizing capital towards projects and businesses that promote the sustainable use and conservation of ocean resources. These funds attract both public and private investment to drive meaningful environmental and economic impact in marine and coastal ecosystems. Here are some notable examples of blue finance investment funds:
- Althelia Ecosphere’s Sustainable Ocean Fund is an investment fund dedicated to financing sustainable ocean enterprises. The fund focuses on projects that promote marine conservation, sustainable fisheries, and aquaculture. Investments include restoring mangrove forests, supporting sustainable seafood companies, and developing eco-tourism initiatives. Find more info here: Link
Key Investments:
- Restoration of over 5,000 hectares of mangrove forests.
- Support for sustainable seafood companies that adhere to best practices in aquaculture.
- Promotion of eco-tourism initiatives that generate income for local communities while protecting marine ecosystems.
- European Investment Bank (EIB) Blue Sustainable Ocean Strategy (Blue SOS)
The EIB’s Blue Sustainable Ocean Strategy (Blue SOS) aims to support projects that protect the oceans, foster sustainable blue economy activities, and enhance coastal resilience. The fund targets a wide range of sectors, including marine renewable energy, sustainable fisheries, and marine conservation. Find more info here:Link
Key Investments:
- Restoration of mangrove forests to protect coastlines and support biodiversity
- Support for sustainable aquaculture ventures that reduce environmental impact and improve efficiency.
- Investment in eco-tourism projects that provide economic benefits while conserving marine ecosystems.
- BlueInvest Fund
Managed by the European Investment Fund (EIF), the BlueInvest Fund provides equity funding to innovative SMEs and startups in the blue economy sector. The fund focuses on businesses that offer sustainable solutions to marine and coastal challenges. More info here: Link
Key Investments:
- Startups developing sustainable aquaculture technologies.
- Companies innovating in marine pollution prevention and waste management.
- Businesses involved in marine renewable energy and ocean technology.
Impact:
- Support for the growth and scaling of blue economy startups.
- Enhancement of innovation and sustainability in marine industries.
- Contribution to job creation and economic development in coastal regions.
- Ocean 14 Capital (United Kingdom)
Ocean 14 Capital is a private equity firm dedicated to investing in sustainable ocean ventures. The firm focuses on scalable solutions that address key challenges in ocean health and sustainability, such as sustainable seafood, marine conservation, and plastic pollution. More info here: Link
Key Investments:
- Companies producing sustainable seafood and improving aquaculture practices.
- Technologies that prevent marine pollution and enhance ocean health.
- Innovations in marine conservation and restoration projects.
Impact:
- Promotion of sustainable seafood production and reduction of overfishing.
- Mitigation of marine pollution through advanced waste management solutions.
- Support for projects that restore and protect marine ecosystems.
- Seventure Partners’ Blue Economy Fund (France)
Seventure Partners’ Blue Economy Fund targets investments in innovative companies that contribute to the sustainable management of marine resources and the blue economy. The fund focuses on technologies and businesses that promote ocean conservation and sustainable use. More info here: Link
Key Investments:
- Startups developing sustainable marine technologies.
- Companies involved in marine biotechnology and sustainable aquaculture.
- Projects that address marine pollution and promote ocean health.
Impact:
- Support for technological innovation in the blue economy.
- Enhancement of marine conservation and sustainable resource management.
- Promotion of economic growth and sustainability in marine industries.
- Ocean Fund by WWF and Mirova
The Ocean Fund is a collaborative effort between the World-Wide Fund for Nature (WWF) and Mirova, an affiliate of Natixis Investment Managers. This fund aims to finance projects that contribute to the protection and sustainable use of marine and coastal ecosystems. More info here: Link
Key Investments:
- Marine protected areas (MPAs) to preserve biodiversity and support sustainable fisheries.
- Sustainable seafood production initiatives, including responsible fishing and aquaculture.
- Projects that address marine pollution, such as plastic waste management and reduction.
III. Blended Finance
Case Study: The Ocean Risk and Resilience Action Alliance (ORRAA)
ORRAA is a multi-stakeholder initiative that uses blended finance to enhance the resilience of coastal communities and ecosystems. By combining public and private investment, ORRAA funds projects that reduce ocean-related risks, such as coastal erosion and extreme weather events. The alliance brings together governments, financial institutions, and NGOs to pool resources and expertise. More info here: Link
Impact and Outcomes:
- Funding of innovative projects that protect coastal infrastructure and habitats.
- Leveraging private investment to amplify the impact of public funding.
- Strengthening of community resilience through capacity-building and infrastructure development.
IV. Microfinance
Case Study: The Fish Forever Savings Clubs
The Fish Forever Savings Clubs, an initiative by Rare, a conservation organization, provide microfinance services to small-scale fishers in developing countries. These savings clubs offer financial literacy training, savings accounts, and access to small loans. The goal is to empower fishers to adopt sustainable practices and improve their livelihoods. More info here: Link
Impact and Outcomes:
- Establishment of over 100 savings clubs across multiple countries.
- Increased financial stability and income for small-scale fishers.
- Adoption of sustainable fishing practices that reduce pressure on marine resources.
The Future of Blue Finance
Looking ahead, the future of blue finance appears promising. With increasing recognition of the need to protect and sustainably manage ocean resources, blue finance is poised to play a vital role in global environmental and economic strategies. Several trends and developments are likely to shape the future of blue finance:
Innovation in Financial Instruments: As the blue finance market matures, we can expect the development of new and innovative financial instruments tailored to ocean sustainability. This could include hybrid bonds that combine blue and green finance, as well as insurance products that protect against climate risks affecting marine ecosystems.
Integration of Blue Finance into Mainstream Investment: As investors become more aware of the risks and opportunities associated with ocean health, blue finance is likely to become more integrated into mainstream investment strategies. This includes the incorporation of blue criteria into environmental, social, and governance (ESG) frameworks, as well as the growth of impact investing focused on marine conservation.
Enhanced Data and Technology: Advances in data collection and technology will play a crucial role in the success of blue finance. Satellite monitoring, artificial intelligence, and blockchain technology can improve the tracking and verification of blue finance projects, ensuring transparency and accountability. This will help build trust among investors and stakeholders and demonstrate the real impact of blue finance initiatives.
Collaboration and Partnerships: The future of blue finance will rely on collaboration and partnerships among governments, financial institutions, businesses, and communities. By working together, stakeholders can pool resources, share expertise, and develop comprehensive strategies for ocean sustainability. Public-private partnerships, in particular, can leverage the strengths of both sectors to drive innovation and investment in blue finance.
Policy and Regulatory Support: Continued support from governments and international organizations will be essential for the growth of blue finance. Policies and regulations that promote sustainable practices, provide incentives for investment, and enforce environmental protections will create a favorable environment for blue finance to thrive. Additionally, international agreements and frameworks, such as the Paris Agreement and the United Nations Decade of Ocean Science for Sustainable Development, will help align global efforts and mobilize resources for ocean conservation.
