New ideas, new resources: the AfDB’s blue bond, a big step towards healthy oceans
The Asia and Pacific region is home to three quarters of the world’s coral reefs and more than half of all mangrove areas. The region’s aquaculture production provides 60% of the total fish consumption in the world. However, the region is also the epicenter of marine plastic pollution. The overexploitation of fish here also threatens global food security and, indeed, the entire seafood industry.
So why don’t governments and multilateral institutions act faster to solve the problems of troubled oceans? Progress towards healthy oceans is severely limited by one challenge: money.
“Until now, 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 transactions to transformative market transactions, ”said Bruno Carrasco, Managing Director, Sustainable Development and Climate Change Department, Asian Development Bank (AfDB).
This month, the AfDB issued its first blue bond, advancing its ambitious plan to build sustainable blue economies and use financial markets to scale up ocean solutions. The 15-year A $ 208 million (approximately $ 151 million) issue was purchased by The Dai-ichi Life Insurance Company and organized by Citigroup Global Markets Limited. The 10-year NZ $ 217 million (approx. $ 151 million) issue was purchased by Meiji Yasuda Life Insurance Company and arranged by Crédit Agricole CIB.
In 2019, the AfDB launched its action plan for healthy oceans and sustainable blue economies for the Asia and the Pacific region. The plan aims to expand funding and assistance for ocean health and marine economics projects to $ 5 billion from 2019 to 2024, including co-funding from partners. Blue bonds are debt instruments whose proceeds are used to finance projects that benefit the health of the oceans. They act by reducing the risks of 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 dearth of bankable deals due to high risks, small deal sizes, and lack of universal investment standards. The AfDB is addressing some of these challenges through blue bonds, supported by its success in green bond issuance, 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 Ingrid van Wees, AfDB Vice President of Finance and Risk Management . “The AfDB is bringing new ideas and new resources to catalyze finance – and we believe blue bonds are a good step forward in meeting this challenge.”
The blue bond model is replicable and scalable, and the AfDB works closely with partners to support their efforts in issuing their own blue bonds. This will generate jobs and boost economic growth by investing in fisheries, marine and coastal tourism, reducing coastal pollution, accelerating a circular economy and boosting renewable marine energies, green ports and maritime transport projects.
The AfDB is the climate bank for Asia and the Pacific, but the support of key partners such as the European Investment Bank, the World Wide Fund for Nature and The Nature Conservancy are helping move towards healthy and sustainable oceans. To go further in large-scale systemic changes, the AfDB seeks to attract more partners to support actions to protect the oceans of Asia and the Pacific.
A healthy ocean is supported by strong and diverse ecosystems. Inspired by this, the AfDB is diversifying and strengthening the blue economy system. In addition to blue bonds, AfDB is expanding the use of insurance to protect coral reefs in the Pacific and Southeast Asia, innovating in eco-compensation systems on the Yangtze River in the People’s Republic of China and supports coastal resilience in vulnerable countries through nature. based solutions.
The rapidly growing ASEAN Green Catalytic Finance Facility, which was developed to help ASEAN governments access technical assistance and co-financing, identifies, accelerates and funds blue projects across Asia from the South East. AfDB’s work on financing natural capital transforms agriculture towards healthy, inclusive and natural food systems, extends forest protection, and restores marine ecosystems and healthy oceans. The Marine Plastic Pollution Control Program finds policy and fiscal solutions to stop the tide of marine plastics entering the coastal ocean.
“While action in one country can bring many countries to their knees, the reverse is also true: the actions of one country can inspire others and accelerate change,” said Van Wees.
Ramoncito Dela Cruz is a communications specialist at the Asian Development Bank.