New ideas, new resources:
ADB’s blue bond a big step toward healthy oceans
THE Asia and Pacific region is home to three-quarters of global coral reefs and more than half of all mangrove areas. The region’s aquaculture production supplies 60% of the globe’s total fish consumption. However, the region is also the epicenter of marine plastic pollution. Overharvesting of fish here is also putting global food security and, indeed, the entire seafood industry in peril.
So why aren’t governments and multilateral institutions acting faster to fix the problems of ailing oceans? The progress toward healthy oceans is hugely limited by one challenge: money.
“So far, funding for ocean projects has been short-term, piecemeal, and generally focused on mitigating the impacts of marine industries. The severity of the problem requires a transition from small deals to transformative market transactions,” said Bruno Carrasco, Director General, Sustainable Development and Climate Change Department, Asian Development Bank (ADB).
This month, ADB issued its first blue bond, driving forward its ambitious plan to build sustainable blue economies and to use the financial markets to scale up ocean solutions. The A$208 million (around $151 million), 15-year issue was purchased by The Dai-ichi Life Insurance Company and arranged by Citigroup Global Markets Limited. The NZ$217 million (around $151 million) 10-year issue was purchased by Meiji Yasuda Life Insurance Company and arranged by Credit Agricole CIB.
In 2019, ADB launched its Action Plan for Healthy Oceans and Sustainable Blue Economies for the Asia and Pacific region. The plan aims to expand financing and assistance for ocean health and marine economy projects to $5 billion from 2019 to 2024, including co-financing from partners. Blue bonds are debt instruments in which the proceeds are used to fund projects that benefit ocean health. They act by de-risking ocean projects and bringing new investors to the table.
While investor demand for blue products has been robust, the market has been plagued by a shortage of bankable deals due to high risks, low transaction sizes, and lack of universal investment standards. ADB is tackling some of these challenges through the blue bonds, backed by its successes in green bond issuances, totaling $705 million in 2020.
“The tipping point for ocean health, marine protection and livelihoods is largely controlled in the Asia and Pacific region,” said ADB Vice-President for Finance and Risk Management Ingrid van Wees. “ADB is bringing new ideas and new resources to catalyze funding — and we believe blue bonds are a good step forward to meet this challenge.”
The blue bond model is replicable and scalable, and ADB is working closely with partners to support their efforts in issuing their own blue bonds. This will generate jobs and stimulate economic growth by investing in fisheries, marine, and coastal tourism, reducing coastal pollution, accelerating a circular economy, and boosting marine renewable energy, green ports, and shipping projects.
ADB is Asia and the Pacific’s climate bank but the support of key partners such as the European Investment Bank, the World Wide Fund for Nature, and The Nature Conservancy is helping to make progress toward healthy and sustainable oceans. To go further in making systemic changes at scale, ADB is looking to attract more partners to support action to protect Asia and the Pacific’s oceans.
A healthy ocean is supported by strong, diverse ecosystems. Drawing inspiration from this, ADB is diversifying and strengthening the blue economy system. In addition to blue bonds, ADB is developing the use of insurance to protect coral reefs in the Pacific and Southeast Asia, innovating eco-compensation systems on the Yangtze River in the People’s Republic of China, and supporting coastal resilience in vulnerable countries through nature-based solutions.
The rapidly growing ASEAN Green Catalytic Finance Facility, which was developed to support ASEAN governments to access technical assistance and cofinance, is identifying, accelerating, and funding blue projects throughout Southeast Asia. ADB’s work on natural capital financing is transforming agriculture towards healthy, inclusive, and natural food systems, expanding forest protection, and restoring marine ecosystems and ocean health. The marine plastic pollution program is finding policy and fiscal solutions to stop the tide of marine plastics entering the coastal ocean.
“If action in one country can bring many countries to their knees, the opposite is also true: the actions of one country can inspire others and accelerate change,” said Ms. Van Wees.