26 September 202211 minute read

The Blue Bond Guidance to Finance the Sustainable Blue Economy

Riding the wave of ocean investment by Small Island-Big Ocean States

This article forms part of DLA Piper’s Sustainable Finance Series: a series of publications and insights on green and sustainable finance and the developments in this sector.


Our oceans and seas cover 70 per cent of our planet and represent over 95 per cent of the biosphere.1 The ocean is our largest ecosystem. Plastic / marine pollution, over-fishing, ocean acidification and ocean warming continue to threaten marine life and limit our ocean’s capacity to moderate climate change. It is clear States are aware of the threats to our ocean ecosystem and have sought to implement initiatives which support Sustainable Development Goal 14 (SDG 14) concerning life below water. SDG 14 encourages States to conserve and sustainably use the oceans, seas and marine resources for sustainable development.2

Many Small Island Developing States (perhaps better characterised as “Small Island-Big Ocean States”) would benefit from better access to private sector capital required to carry out such climate mitigation measures.

Private sector capital if mobilised well can play an important role in supporting Small Island-Big Ocean States to protect their oceans whilst also promoting economic development. With every USD1 invested in sustainable ocean solutions yielding at least USD5 in benefits, including social, health, economic and environmental benefits, investing in our oceans is clearly a smart investment.3

This article provides an overview of our key insights from the 2022 UN Ocean Conference, including an overview of one of the key achievements from the conference being the launch of the consultative draft of the global practitioner’s guide for “Bonds to Finance the Sustainable Blue Economy” (the Blue Bond Guidance), and our thoughts on the future of blue finance.

UN Ocean Conference 2022

This year’s UN Ocean Conference, which recognised a “collective failure to achieve Ocean related targets”, called on States and the private sector to reaffirm their commitments to protecting ocean health and productivity. Key voluntary commitments from States included:

  • Indonesia announcing a plan to launch a blue bond to fund ocean-based initiatives;4
  •  Portugal committing to ensure that 100 per cent of the marine area under Portuguese sovereignty or jurisdiction is assessed as being in Good Environmental State and classify 30 per cent of the national marine areas by 2030;
  • Kenya developing a national blue economy strategic plan. Kenya also committed to developing a national action plan on sea-based marine plastic litter; and
  • India committing to a Coastal Clean Seas Campaign and will work toward a ban on single use plastics.5

To achieve these objectives, a significant scaling up of ocean investment will be required. Scaling up ocean investment was a key discussion point at the UN Ocean Conference’s UN Global Compact (UNGC) Blue Finance Breakfast, where panellists considered different ways the private sector could get involved in supporting ocean initiatives, including investing in sustainable finance products such as blue bonds. Importantly, panellists emphasised harmonised taxonomies and promoting ocean literacy would help to bridge the gap between industry and investors, leading to greater scaling up of ocean investment. Small Island-Big Ocean States are now seeking to attract financing for their own ocean initiatives through sustainable finance options such as blue bonds. However, one major challenge to countries accessing the finance they need is a lack of clear sustainable finance taxonomies to ensure issuers and investors are aligned in their understanding of the ESG outcomes which they are committing to/investing in (in the case of investors). The consultative draft of the Blue Bond Guidance, one of the most significant outcomes at the UN Ocean Conference, aims to address this issue.

Blue Bond Guidance

The Blue Bond Guidance, developed by the UNGC, the International Finance Corporation, the Asian Development Bank, the United Nations Environment Program Finance Initiative and the International Capital Markets Association (ICMA), in conjunction with market participants, recommends a series of steps for those interested in issuing a blue bond aligned with a sustainability strategy to advance a healthy, productive ocean. The Blue Bond Guidance provides clarity to governments, financial institutions, companies, and practitioners on financing blue economy initiatives under ICMA’s existing voluntary standards for green and sustainable bonds. Critically, the Blue Bond Guidance aims to provide investors with clarity on the types of investments eligible for funding with blue bonds.

Importantly, the Blue Bond Guidance is intended to act as an overlay to existing sustainable finance frameworks, as opposed to developing an entirely new set of principles for issuers and investors to follow. There is already substantial guidance on financing blue initiatives, for example, the European Union’s Sustainable Blue Economy Finance Principles. Rather, the Blue Bond Guidance aims to consolidate the existing principles and frameworks from multilateral investment banks and international organisations to clarify to investors what a blue investment looks like and to avoid further market fragmentation. As a result, the Blue Bond Guidance has the potential to deliver significant benefits to both Small Island-Big Ocean State issuers and investors as described below.

Providing clarity to the market leading to scaling up of ocean investment

It is important that the ocean community and the finance community have a shared understanding of the meaning of “blue” to encourage long-term partnerships between these sectors. In turn, standardisation of the blue bond market will also decrease the risk of “blue washing” – where a bond which is marketed as being used to promote “blue” initiatives does not necessarily use the proceeds to pursue those objectives.

For other forms of sustainable finance, such as the green bond, investors can take comfort knowing that their investment aligns with ICMA’s Green Bond Principles. Rather than creating a separate set of “Blue Bond Principles”, the Blue Bond Guidance aims to clarify how a blue bond aligns with existing global standards to give investors the credibility and transparency that comes with those standards. Aligning with these standards means a blue bond is then a type of “Green” or “Sustainability-Linked Bond” “with funds applied to strategies or projects which advance a more sustainable or productive ocean”.6 Promoting alignment with existing ICMA frameworks ensures issuers and investors are "speaking the same language" when it comes to developing ocean initiatives and promotes standardisation and clarity in how to issue a blue bond. Ultimately, the Blue Bond Guidance promotes ocean literacy and will help to bridge the gap between industry and investors, leading to greater scaling up of ocean investment.

The Blue Bond Guidance also goes a step further, aiming to provide clear examples of indicative categories and considerations for eligible blue projects. Such categories include sustainable seafood, coastal and marine tourism, sustainable maritime transport and marine renewable energy, each with further guidance on projects which would or would not satisfy the Blue Bond Guidance. This further clarification will assist Small Island-Big Ocean States have a clearer understanding of what SDG 14-focused initiatives it can pursue and seek private capital support on, whilst also providing investors with certainty that the initiatives they are funding align with existing global standards.

Encouraging a pipeline of bankable blue investments

It could be that the market’s current lack of clarity and standardisation regarding blue bond issuances is one of the causes for a lack of a pipeline of bankable blue investments. As panellists at the UNGC Blue Finance Breakfast emphasised, investors need to be able to monitor and measure KPIs to promote certainty in their investment. Prior to the Blue Bond Guidance, there was no clear guidance to issuers or investors as to how a blue bond would be marketed and measured. As a result, investors lacked sufficient information to model and predict financial risks and returns, in turn preventing them from financing blue industries. Consequently, just eight percent of investment in SDG 14 initiatives is derived from the private sector.7 The Blue Bond Guidance seeks to address this concern.

As noted in our previous article on blue bonds,8 to catalyse investment into ocean opportunities, it is imperative that an issuer develops a clear road map which outlines its objectives for its ocean economy. Issuers that implement strong ocean economy plans are likely to leverage greater interest from the private sector, particularly for Small Island-Big Ocean States, because these plans can help to direct the type of investment required to ensure a sustainable outcome. The Blue Bond Guidance recognises the importance of such planning, requiring issuers to develop a “blue framework” to “shape the ocean component” of the bond. Blue bonds should have a clearly defined sustainability goal directed at achieving SDG 14 and should have a KPI (or project) which provides clear ambitions that do not harm the ocean. While blue bonds are ultimately focused on promoting ocean conservation, they can (and should) focus on sustainable business opportunities, both for the issuer and investor. If investors have sufficient clarity and certainty regarding a blue bond’s objective and KPIs, investors can appropriately assess and manage potential investment risks. Armed with this additional information, investors can become more comfortable with any risks, leading to greater investment in ocean initiatives and greater support for Small Island-Big Ocean States.

Clear guidance on blue bond issuance will encourage a pipeline of bankable blue investments which will then have a consequential effect on investment in Small Island-Big Ocean States. For example, if a Small Island-Big Ocean State issues a blue bond using the Blue Bond Guidance, this can increase their credit perception, raising its profile in the international capital markets and promoting confidence among other investors. This may then lead to other ancillary private sector engagement in the country. Sustainable finance projects will often draw on the expertise from the domestic and foreign private sectors who may also identify additional opportunities to invest in Small Island-Big Ocean States, broadening the impact of the initial investment. Finally, this may lead to the creation of larger and longer-term financing opportunities, expanding funding sources for Small-Island Big Ocean States.

Recognition for ocean industries & assisting Small Island-Big Ocean States achieve their ocean agendas

While the Blue Bond Guidance aligns a blue bond under the banner of “green” or other sustainable bonds, having dedicated Blue Bond Guidance acknowledges some of the key differences in how blue bonds are marketed and monitored and may help ocean industries to feel greater recognition within the sustainable bond market framework. For instance, while green or other sustainability bonds may use metric-tonnes of carbon to measure the impact of initiatives, projects funded using blue bonds have a greater variety of metrics such as ocean health and sustainable practices. One example could be the percentage of vessels involved in sustainable fishing operations using low-carbon fuels. Such recognition may encourage more public and private sector issuers and investors to enter the market by increasing confidence in the impact indicators an issuer may choose. Understanding and appreciating these differences is critical to catalysing investments into SDG 14-focussed initiatives and scaling up the blue economy.

The Blue Bond Guidance can also assist Small Island-Big Ocean States to access private sector capital to fund blue initiatives. Adhering to the Blue Bond Guidance is likely to make Small Island-Big Ocean States more attractive to risk adverse investors. For example, adhering to the Blue Bond Guidance, particularly in setting clear objectives and adhering to KPIs, may stabilise a country’s credit rating, promote investor confidence, and encourage further investment into its economy. As a result, Small Island-Big Ocean States may have greater access to private sector capital than previously due to greater investor confidence.

The future of blue finance

As investors continue to show interest in thematic bonds, there is substantial potential for blue bonds to have a transformative effect on ocean economies. Finance is one of the most significant factors in bringing about changes to climate mitigation for Small Island-Big Ocean States. It is clear blue financing, especially blue bonds issued under the Blue Bond Guidance, will represent a turning point in mobilising private sector capital as Small Island-Big Ocean States look to transition ocean infrastructure to be more climate resilient whilst also promoting economic development. It is hoped the Blue Bond Guidance will help create a market standard for blue issuances going forward, providing issuers and investors with much needed clarity on the parameters of ocean investments.

To learn more about the role of sustainable finance in the ocean economy, you can read our article Shades of blue in financing: Transforming the ocean economy with blue bonds here.

1 Convention on Biological Diversity, Oceans contain a wealth of biodiversity (online, 26 November 2018)
2 United Nations, Sustainable Development Goal 14 (online, 2022)
3 High Level Panel for a Sustainable Ocean Economy, A Sustainable Ocean Economy for 2050: Approximating its benefits and costs (online, 2022)
4 United Nations Development Programme, Indonesia unveils a plan to launch Blue Bond at UN Ocean Conference 2022 (online, 1 July 2022)
5 United Nations, UN Ocean Conference ends with call for greater global commitment to address dire state of the ocean (online, 1 July 2022)
6 United Nations Global Compact, Practical Guidance to Issue a Blue Bond (online, 2022)
7 Megan Howell, Dearth of data could leave blue finance lagging (online, 29 March 2022)
8 Joywin Mathew & Claire Robertson, Shades of blue in financing: Transforming the ocean economy with blue bonds (online, 12 January 2021)