ADB’s blue bond aims to protect ocean health

The Asia-Pacific region is home to three-quarters of global coral reefs and more than half of all mangrove areas. 

Through aquaculture production, the region supplies 60% of the world’s total fish consumption. 

However, the region is also the epicentre of marine plastic pollution, the Asian Development Bank (ADB) said in a news release. 

Overharvesting of fish here is also putting global food security and the entire seafood industry in danger. 

According to ADB, 8 million tonnes of plastic are entering the ocean every year and mostly from Asia, along with huge volumes of agricultural pollutants and untreated wastewater. 

Climate change is causing rising sea levels, ocean warming, and acidification, while unsustainable fishing is depleting fish stocks. Not taking action means the death of 90% of coral reefs by 2052 and the loss of all commercially exploitable wild fish stocks by 2048.

So why are not 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 of Sustainable Development and Climate Change Department at ADB. 

The name is bond — blue bond

This month, ADB issued its first blue bond in Australian and New Zealand dollars to finance ocean-related projects in Asia and the Pacific. 

This move intends to drive 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-chi 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. 

“Having our first Australian dollar 15-year and New Zealand dollar 10-year blue bonds under ADB’s Green and Blue Bond Framework is a new milestone for sustainable ocean finance. The tenor reflects the needs and our long-term support for the sector,” ADB Vice-President for Finance and Risk Management Ingrid van Wees said during the launch of the bond. 

“With our framework, we set a new standard for blue financing in the market that can be replicated,” van Wees added. 

The bonds are part of ADB’s Action Plan for Healthy Oceans and Sustainable Blue Economies launched in 2019, which aims to catalyze sustainable investments in Asia and the Pacific by committing to invest and provide technical assistance of at least $5 billion by 2024.

“The Action Plan for Healthy Oceans and Sustainable Blue Economies is a vital part of ADB’s strategy to expand the necessary support for its developing member countries (DMCs) to invest in healthy oceans, ensure the achievement of SDG 14, and contribute to the security and prosperity of the region,” according to ADB Vice-President for Knowledge Management and Sustainable Development Bambang Susantono. 

Sustainable Development Goal (SDG) 14 addresses "life below water" and is one of 17 SDGs established by the United Nations in 2015.

The funding gap to support healthy oceans is getting wider every year and the scale of the problem requires a leap from small transactions to transformative market deals. Innovative financial products like blue bonds diversify and expand the investor base, thereby increasing the amount of capital that can be invested in ocean health.

What are blue bonds?

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, worth $705 million in 2020. 

“The tipping point for ocean health, marine protein and livelihoods is largely controlled in the Asia and Pacific region,” said van Wees, adding that: “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 People’s Republic of China, and supporting coastal resilience in vulnerable countries through nature-based solutions. 

The rapidly growing ASEAN Green Catalytic Finance Facility was developed to support ASEAN governments to access technical assistance and co-finance, 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 van Wees.