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Title page
Title: Navigating the “turquoise zone” of sustainable finance: An Exploration of the Emergence and
Contribution of blue bonds
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Author names and affiliations:
Morag Torrance, School of Geography and the Environment, University of Oxford, S Parks Rd,
Oxford OX1 3QY, UK
Felicia Liu, Department of Environment and Geography, University of York, York, YO10 5NG *
Dariusz Wójcik, School of Geography and the Environment, University of Oxford, S Parks Rd,
Oxford OX1 3QY, UK; St Peter’s College, New Inn Hall St, Oxford OX1 2DL, UK
*Corresponding author: Felicia.liu@york.ac.uk
Acknowledgements
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Dariusz Wójcik has received funding from the European Research Council (ERC) under the European
Union’s Horizon 2020 research and innovation programme (grant agreement number 681337). The
article reflects only the authors’ views, and the ERC is not responsible for any use that may be made
of the information it contains.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Keywords
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Blue economy; sustainable finance; green bonds; marine conservation; biodiversity
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Highlights
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Blues bonds emerged in recent years to finance marine conservation
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Issuers, investors, and use of proceeds are highly divergent
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Corporates, NGOs, and multilateral development banks hold different visions
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Concerns over transparency, governance, and impact generation remain
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Abstract
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In 2018, the Republic of Seychelles issued the world’s first blue bond as a ‘debt for nature swap’.
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Hailed as an innovative solution to mobilise a blend of public and private capital to the conservation
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of vulnerable marine ecosystems, other multilateral development banks, sovereigns, and private sector
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actors followed suit to issue blue bonds. Despite its growing popularity, there is yet to be clear
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consensus over what ‘blue’ entails and how ‘blueness’ should be governed. In this paper, we provide
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a comprehensive analysis of the emergence and evolution of the blue bond market from an economic,
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environmental, and geographical perspective, and ask whether blue debt instruments are effective in
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promoting positive environmental outcomes in marine ecosystems and engaging new participants that
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were previously excluded from the sustainable finance market, at the same time maintaining market
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viability of the instrument. Our findings demonstrate varying degrees of success in achieving these
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objectives. Unlike the green bond market, which is primarily dominated by issuers from Western
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countries, more than half of blue bonds have been issued by Asian firms and small island sovereign
states. Additionally, we identified two distinctive but overlapping groups of actors, led by
conservation NGOs and investment banks, championing divergent definitions, structures, and
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governance of this novel debt instrument. The former advocates for blue financing that exclusively
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focuses on ocean conservation, whereas the latter seeks to expand the definition of ‘blue’ to
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
encompass a broader range of ocean economic activities. Consequently, blue bonds issued by the
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latter group also enjoy better market returns and attract a wider array of private-sector investors. Our
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research reveals that multilateral development banks play a mediating role between these two groups,
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but the absence of standardised eligibility requirements and governance standards raises concerns
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regarding ‘blue washing’. Path dependencies also mean that a lot of lenient but market-friendly
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governance practices from the green bond market, such as voluntary reporting and self-labelling, are
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transferred directly to blue bonds. Moreover, we raise questions over the legitimacy of wealthy
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Western NGOs and private sector investors to wield significant influence over the management of
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vulnerable marine ecosystems through brokering and investing in blue bonds. We argue the emergent
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blue debt market is in a ‘turquoise’ space, where stakeholders with divergent interests and needs are
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jostling to establish practices that best suit their needs. We caution that current processes have left
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local communities out of the conversation. To this end, we question whether market development is
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headed towards a direction where vulnerable ecologies and communities can reap the benefits the
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emergence of blue bonds.
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Introduction
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In the last decade, the financial sector has become increasingly aware of the environmental, social,
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and governance (ESG) risks and impact of investments. Climate change has emerged to be a key
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concern after the 2015 Paris Accord, with a growing number of high-profile financial institutions
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taking measures to stocktake, reduce, and report their climate-risk exposure, while capturing
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opportunities to invest in positive impact-generating assets (TCFD 2017). More recently, the threat of
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biodiversity loss is coming to the fore of financial discourse (NGFS 2021; UNEP 2021).
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Notwithstanding these developments, biodiversity conservation and nature recovery - especially
conservation and recovery of marinescapes - receive markedly less attention (Bos et al. 2015; CBI
2021). In the last decade, only 1% of the ocean economy’s total value was invested in sustainable
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projects through philanthropy and bilateral public funding (WRI 2020). Given that oceans cover 71%
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
of the planet’s surface, and provide homes and livelihoods for nearly 3 billion people, while
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generating an estimated economic value of USD1.5 trillion (World Bank, 2022), this lack of
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investment flow towards marine conservation presents both a missed opportunity and an impediment
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to sustainable development of ocean resources.
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The emergence of blue debt instruments may provide a solution to this financing gap. The only
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existing study, to our knowledge, has theorised blue bonds as a sub-set of the now familiar and
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popular model of green bonds (Thompson 2022). However, this interpretation assumes the uniformity
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of blue bonds and overlooks the divergent rationales, actors, and relational dynamics that drive the
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development of this new category of sustainable debt. Understanding these nuances is crucial because
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it shapes how a new sustainable finance instrument is constructed, which in turn determines the
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(in)effectiveness of the instrument in delivering positive environmental impact at scale. To address
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this gap in knowledge, the paper seeks to answer two questions. How and why has the new ‘blue debt’
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category emerged? What does it mean for raising and channelling capital to currently underfunded
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ocean conservation and recovery, and for the broader sustainable debt universe?
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We address them by analysing the unique emergence and evolution of blue bonds and how this
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process has shaped the structure and coverage of this financial instrument. In doing so, we contribute
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to understanding the landscape of this emergent and potentially influential financial instrument for the
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sustainable development of marinescapes, which bears immediate implications for equitable
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development of small island nations, biodiversity recovery and development of nature-based
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solutions. This adds to a rapidly growing literature on sustainable finance, providing important
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insights in understanding how novel instruments and practices of sustainable finance emerge, and how
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these processes of innovation shape the way in which sustainable investing (fails to) contribute to
delivering timely, scalable, and measurable positive outcomes. Our paper also engages with critical
debates on the financialisation of nature and nature recovery. Blue bonds are pushing the frontiers of
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sustainable finance by, for the first time, devising a financial instrument dedicated to the sustainable
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
development and recovery of the oceansphere. Our investigation of how the constellation of actors,
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their motivations and tensions shape early market construction will provide an entry point for critical
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reflection on how the encroaching influence of sustainable finance in public discourse impacts
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societal interaction with the marinescape in the Anthropocene.
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The remainder of the article is organised as follows. The subsequent section will review the literature
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on sustainable finance, focussing on the emergence of different species of sustainable debt
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instruments. After a brief methodological section, we present our findings and discuss the key themes
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emerging from our analyses. The final section concludes.
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Literature Review: Blue bonds in Context
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Amidst the rapid growth of sustainable finance, sustainable debt has risen to prominence as a
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pragmatic solution to ‘switching’ capital towards sustainable destinations (Castree and Christophers
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2015). By 2021, the sustainable bond market surpassed the USD1 trillion mark with close to 17,000
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issuances (CBI 2022). Much like regular debt, sustainable debt can be understood as an ‘IOU’ where
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the borrower (otherwise known as an issuer) and the investor enter into an agreement of terms, rates,
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and payments of the debt. Uniquely, the proceeds of the debt must be deployed towards assets with
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environmental and social sustainability benefits, or to improve the sustainability performance of the
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borrowing firm (Jones et al 2020; see Fig. 1 for a simple demonstration). To enhance the credibility of
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the sustainability claims of the asset or performance target, the issuer may choose to hire a
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sustainability specialist firm to verify the credentials. To this end, investors of sustainable debt expect
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both financial returns, as well as positive sustainability outcomes on their investments.
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This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
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Figure 1 Typical structure of a sustainable debt that seeks to deliver both financial revenue and
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positive sustainability outcomes (source: author’s own)
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Scholars from different disciplinary backgrounds have sought to explain the rising popularity of
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sustainable debt. The business and finance literature focuses on whether sustainable debt provides
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easier and cheaper capital for the borrower, (Baker et al. 2018; Hachenberg and Schiereck 2018;
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Harrison et al 2020; Karpf and Mandel 2018), or an improvement of the eield for the investor
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(Flammer 2021; Tang and Zhang 2020). While research is yet to reach a consensus that sustainable
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debt improves the financial stakes for issuers or investors, it suggests that there are strong non-
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financial business cases for issuers and investors alike to engage in the sustainable debt market as a
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means to enhancing their reputation and stakeholder legitimacy (Maltais and Nykvist 2020).
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Scholars of financial sociology and geography have conducted qualitative deep-dives on how the
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sustainable debt market is constructed. A consensus emerged that the standardisation of the Green
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Bond Principles (GBP) was key to the popularisation of sustainable debt and navigating the
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
conflicting logic of profits and sustainability (Hilbrandt and Grubbauer 2020; Monk and Perkins
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2020; Perkins 2021). Published by the International Capital Markets Association (ICMA), an
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internationally recognised association representing the fixed income investing market, the GBP has
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been crucial in codifying and consolidating green bonds as a legitimate investment tool (Perkins
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2021). By setting out four, voluntary principles-based components that issuers are expected to
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disclose, namely (1) use of proceeds; (2) process for project evaluation and selection; (3) management
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of proceeds and (4) reporting, GBP set a common language and expectations for sustainable debt.
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This design is credited to a coalition of multilateral development banks, financial institutions and
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sympathetic non-government organisations that constructed a ‘lenient zone’ of qualification that
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requests just enough information from issuers to uphold the integrity of the product category, while
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still being sufficiently flexible to maximise market growth (Perkins 2021). This coalition of
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innovative champions reinforced the legitimacy of sustainable debt through repeated high-profile
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issuances (Monk and Perkins 2020). Furthermore, by adopting an ecological modernisation framing
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of sustainable debt as a ‘win-win’ solution to both finance and sustainability, sustainable bonds are
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framed as a financially attractive and politically palatable ‘climate solution’ for public and private
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sector stakeholders to engage with (García-Lamarca and Ullström 2022; Hilbrandt and Grubbauer
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2020).
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However, this market-friendly approach to sustainable debt governance has also led to significant
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greenwashing concerns (Bloomberg 2019; Bracking 2015). Greenwashing comes in three distinct but
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interrelated forms. First, sustainable debt has funded environmentally dubious projects. For example,
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the Hong Kong International Airport issued a USD 1 billion green bond to fund the construction of a
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third runway, which compromises the surrounding marine ecosystem inhabited by the endangered
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Chinese white dolphins, in addition to enabling growth in carbon-intensive air traffic (Reclaim
Finance 2022). Second, sustainable debt has been used as window dressing for firms that maintain a
highly unsustainable business model. For example, Teekay Shuttle Tankers, a Canadian shipping firm
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specialising in oil and gas transportation, has attempted to issue a USD150 million green bond to fund
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the building of new lower-carbon tankers (Environmental Finance 2019). Third, projects supported
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
by labelled sustainable debt instruments often lack additionality, with no evidence suggesting that the
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same projects or assets would not have been pursued for purely financial reasons (Jones et al. 2020).
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The jury is still out on whether sustainable debt market can deliver positive environmental or social
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impacts. Having been conceptualised, designed, and governed by market actors, sustainable debt is
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highly malleable to change as configurations of actors and tools shift. The emergence of ‘blue bonds’
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presents an opportunity to renegotiate and reconfigure the practices and boundaries of the sustainable
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debt market. The ‘blue economy’ emerged as a distinct offshoot of the ‘green economy’, which seeks
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to draw attention to marine natural capital assets as a new economic frontier (Schutter et al. 2021).
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While investment in ocean protection and sustainable maritime projects have historically been
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classified under ‘green’ finance, the bulk of green finance has focussed on decarbonising the built
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environment and conserving terrestrial ecosystems. As a result, ocean conservation and maritime
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decarbonisation concerns exist only at the margins of green finance discourses. The remainder of this
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article will explore whether and how the differentiation of ‘blue’ from ‘green’ creates a distinctive
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discourse that could draw policy attention and investment flow towards ocean scapes (McFarland
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2021). That is, how has the sustainable finance community navigated this emergent ‘turquoise zone’?
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Materials and Methods
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We took a multi-step, qualitative analytical approach to investigate the emergence of the blue bond
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market. First, we conducted a desk-based analysis of reports published by multilateral development
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banks, governments, financial institutions, and civil society organisations related to blue bonds and
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the blue economy. We traced their relationship to identify the flow of knowledge, influence, and
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capital to map out the constellations of actors involved in this emergent space. Building upon this, we
consulted corporate reports, press releases and bond issuance databases, including Bloomberg,
Reuters and Cbonds, as well as second-party reports such as the Climate Bonds Initiative to stocktake
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blue bond issuance so far. Specifically, we identified key information (whenever available) such as
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the identity of issuers and investors, arrangers and managers, use of proceeds, and disclosure,
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
verification, and impact measurement methodology. By doing so, we can draw linkages between
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unique narratives, constellation of actors, and practices that emerged together with this novel
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instrument. To triangulate our desk-based analysis, a semi-structured interview with representatives
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from an early blue bond issuer provided us with additional information about experiences and
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processes that was not evident in the written documentation.
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Results
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Rapid Expansion and Evolution
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The blue bond market took root from a ‘debt for nature swap’ issued by the Republic of Seychelles in
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2015. With the help of the World Bank and The Nature Conservancy, an international NGO, the swap
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reduced the island nation’s outstanding sovereign debt and savings from the swap was redirected to
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coastal ocean conservation (The Nature Conservancy, 2016). Three years later, the Republic of
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Seychelles issued the world’s first blue bond, with proceeds used exclusively to support sustainable
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marine and fisheries project (The Global Environmental Facility, 2018). Seychelles’ innovative
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approach to channelling investment towards marine ecosystems inspired Scandinavian pension funds
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and insurers to seek solutions to finance the protection of the Nordic-Baltic marine resources and
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respond to demands from clients conscious of ocean pollution. Leveraging on existing wastewater
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treatment facilities, the Nordic Investment Bank captured this opportunity by issuing its first blue
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bond to finance the cleaning up of excessive eutrophication that has harmed ecosystem health and
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threatened upstream sustainable urban development (NIB, 2019).
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These early issuances set the stage for innovative, collaborative approaches to structuring and issuing
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blue debt instruments. The scope of blue bonds has evolved and expanded as new issuances –
including a blue loan borrowed in 2022 - bring new actors and objectives to the discourse. In total, we
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identified seventeen blue debts issued between 2018 and 2023, with at least four more under
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construction at the time of publication (see Table 1 below). The total volume stands at USD 4.04
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
billion, a fraction of the broader sustainable debt universe which surpassed USD 1 trillion in 2021.
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Nevertheless, we observed four key features that would shape the development trajectory of blue debt,
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namely the definitional contest of ‘blue’, the divergent economics of blue debt, the geographies of
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investment flows, and impact measurement approaches.
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Table 1. The evolution of the global blue debt market
Year
Issuer
Name
Size,
Arranger
Term
coupon
rate
Area
3rd Party
Investors
of
Targeted
Monitoring
Seychelles
Public
Procee
d*
Seychelles
USD
The World
Nuveen,
Seychelles
Blue Bond
15m,
Bank,
Calvert
private trust
ot
p
2019
Use
Rep. of
NIB
1
10 yrs,
Standard
Impact
fund with
6.5%
Chartered
Capital,
MPAs and
Bank
Prudential
local DBS
SEB
Scan. inst.
Nordic-Baltic
SEK
Blue Bond 1
2b,
tn
2018
Known
ee
rr
and
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2
Baltic Sea
investors
annual NIB
rin
5 yrs,
World Bank
Pr
ep
2019
Cicero and
impact report
0.38%
WB SD Blue
USD
Morgan
Private
Bond
10m,
Stanley
placement
3 yrs,
NYC
with High
-
2
Not
WB Impact
disclosed
report
Net Worth
clients
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USD
Credit
Private
Economy
28m,
Suisse
placement
Bond
5 yrs,
NYC
with High
2.73%
Net Worth
avg.
clients
1
Not
Bank of
Bank of China
USD
Credit
Van Eck
China - Paris
Blue Bond
500m,
Agricole,
Branch
USD
3 yrs,
0.95%
WB Impact
we
d
WB SD Blue
disclosed
ev
ie
2020
World Bank
2, 4
report
China
EY annual
Vectors
95.68%,
reporting
BNP
Green
France
Paribas,
Bond ETF;
Great
Société
UBS ETF
Britain
Générale
(Lu) JP
4.32%
ee
rr
2019
Morgan
Bank of
Bank of China
CNY
Macau
Blue Bond
3b, 2
Branch
CNY
yrs,
USD ESG
Diversified
Bond
ot
p
China -
3.15%
NIB
Nordic-Baltic
SEK
Danske
Scan. inst.
Blue Bond 2
1.5b,
Bank,
investors
5 yrs,
Swedbank
Qingdao
tn
2020
Qingdao
CNY
Industrial
Water Group
Water Group
300m,
Bank of
Blue Bond
3 yrs,
China
2
Baltic Sea
Cicero and
annual NIB
impact report
3.63%
-
3
Qingdao
Lianhe
province
Equator
Environment
Impact
Assessment
Co.
Pr
ep
2020
rin
0.10%
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Seaspan
Seaspan Blue
USD
BNP
-
1
Corp.
Transition
750m,8
Paribas
maritime
Bond
yrs,
China,
routes
5.50%
Societe
Hong
Kong
Thai Union
THB
Bank of
Thai Gov.
Group
Sust. -Linked
5b,
Ayudhya,
Pension
Blue Finance
7 yrs,
Mizuho
Fund,
Bond 1
2.47%
Bank,
Muang
Mitsubishi
Thai Life
UFG Bank
Insurance
ADB
ADB Blue
AUD
Citigroup
Dai-chi
Bond AUD
208,
Global
Life
15 yrs,
Markets
Insurance
1.80%
ADB Blue
rin
217,
Credit
Meiji
10 yrs,
Agricole
Yasuda
2.15%
CIB
Life
Southeast
Sustainalytic
Asia
s
Asia and
Cicero
Pacific
Insurance
Industrial
USD
Industrial
Van Eck
Bank of
Bank of China
450m,
Bank of
Vectors
China
Blue Bond
3 yrs,
China
Green
1.13%
Hong
Bond ETF
Pr
2
s
Company
Industrial
ep
2021
Sustainalytic
NZD
tn
Bond NZD
1
ee
rr
Thai Union
ot
p
2021
ev
ie
Generale
2021
Global
we
d
2021
2, 4
China
Sustainalytic
s
Kong
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Credit
Agricole
CIB
2021
“Debt for
USD
TNC and
Investment
ocean
364m,
Credit
Company, a
conservation
19 yrs,
Suisse
subsidiary of
swap” Blue
-
NYC
TNC
Bond
Thai Union
Thai Union
THB
Bank of
Thai asset
Group
Sust. - Linked
6b,
Ayudhya
managers
Blue Finance
5 and
Bond 2
10 yrs,
2022
ot
p
2.27%
Alecta
5
BDO
BDO Unibank
USD
BDO
Unibank
Blue Bond
100m,
Capital
Belize
ev
ie
Belize Blue
waters
ee
rr
2021
we
d
Branch,
IFC
1
2
Public
private trust
fund with
MPAs
Southeast
Sustainalytic
Asia
s
Philippines
IFC
Guidelines
7 yrs,
Bank of
Bank of
USD
Bank of
IFC, ADB,
Qingdao
Qingdao Blue
70m,
Qingdao
DEG and
rin
2022
tn
-
Finance
NA
1
Projects in
IFC
Qingdao
Guidelines
Barbados
Public
waters
private trust
Proparco
Project
Govt. of
Debt for ocean
USD
Credit
Nuveen
Barbados
conservation
73.3m,
Suisse
(80%)
with the
swap” Blue
-
NYC, TNC
fund with
TNC and the
Bond
and CIBC
MPAs
Pr
ep
2022
5
IADB
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Caribbean
Banco
Banco
USD
Banco
IFC,
International
International
79m,
Internation
Symbiotics
Ecuador
Blue Bond
-
al,
Investment
Blue
Symbiotics
s, LAGreen
Guidelines
Investment
Rep. of Fiji
Fiji Blue Bond
2023
USD
Under
50m,
constr.
Govt. of
Gabon ‘Debt
USD
Under
2023
Gabon with
for Nature
700m
constr.
the TNC
Swap’ Blue
tn
Bond
ot
p
Exp.
TMBThanac
TMBThanacha
2023
hart Bank
rt Bank Blue
Thailand
Bond
-
ep
-
-
1
5
Fiji Waters
Fiji
Sustainable
Bond
Framework
Gabon
-
coastal
waters
IFC to
1
Thailand
constr.
commit up
and Blue
to USD
Bond
50m
Framework,
S&P Green
IFC
Guidelines
Exp.
South Pacific
ADB Blue
2023
Islands
Bond
Pacific
Incubator
Ocean
Pr
ICMA GBP
Under
rin
Exp.
Ecuador
and IFC
ee
rr
s
Exp.
1
ev
ie
2022
we
d
First
-
ADB
-
1
South
-
203
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* Use of Proceeds: 1. Blue Economy, 2. Restoring Water Health, 3. Desalination, 4. Offshore Wind,
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5. Ocean Conservation
206
Definition of ‘Blue'?
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All blue debt instruments are self-labelled by the issuers, and we observed a divergence of definitions.
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One influential definition is offered by the World Bank, one of the first green bond issuers in the
209
world and a key actor supporting the popularisation of sustainable debt globally (Monk and Perkins
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2020). It defines blue bonds as “debt instruments issued by governments, development banks or
211
others to raise capital from impact investors to finance marine and ocean-based projects that have
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positive environmental, economic and climate benefits” (The World Bank, 2018b, online). This
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definition places emphasis on governments and multilateral development banks as issuers of blue
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debt, classifying it as a public financing tool. It restricts blue bonds to an ‘impact investing’ tool,
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which is commonly understood amongst the financial community as an investment niche seeking to
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“generate positive, measurable social and environmental impact alongside a financial return” (GIIN,
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online), with some impact investors willing to accept concessions on financial returns (Brest and Born
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2013, p.24). The Climate Bonds Initiative, a London-based NGO dedicated to the promotion and
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governance of sustainable debt, offered a broader definition of the objective of blue bonds, where they
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“finance sustainable land use and marine resources, and land and marine conservation” (CBI 2019, p.
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16). This definition still requires alignment with marine sustainability goals, but it makes no
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specification of the type of issuer or any requirements for impact creation.
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More recently, the International Finance Corporation (IFC), the private sector-facing arm of the
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World Bank, published guidelines providing more concrete recommendations on eligible projects,
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focusing on those that contribute to UNSDG goals 6 ‘Clean Water and Sanitation’ and 14 ‘Life Below
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Water’ (IFC, 2022). Notably, the IFC explicitly aligned its guidelines with the Green Bond Principles,
suggesting that it targets a broad audience, including mainstream corporations and financial
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institutions that will be engaging in blue finance for market-rate profits.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Notwithstanding the growing breadth in the process of standardisation of ‘blue finance’, we found an
230
even broader range of use of proceeds amongst the present universe of self-labelled blue bonds. Three
231
blue bonds – two dedicated towards offshore renewable energy and one committed towards seawater
232
desalination - do not fall under the definitional remit of the World Bank, the Climate Bonds Initiative,
233
or the International Finance Corporation.
234
Variety of Issuers, Debt Models, and Coupon Rates
235
Aligned with the divergent definitions of blue finance, we identified five key types of issuers in Fig. 2
236
below, namely multilateral development banks (n=5), sovereigns (n=3), hybrid (n=2 defined as state-
237
owned enterprises or banks that sit between sovereign and private sector) and private sector actors
238
(financial institutions n=4; corporates n=3;).
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Multilateral
development
bank, 5
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Hybrid, 2
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Financial
institution, 4
Sovereign, 3
Corporate, 3
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This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Figure 2. Number of Issuers by Type
244
Blue debt issued by multilateral development banks and sovereigns tend to finance projects that are
245
generally beneficial for marine health, such as the restoration of water ecosystem health (n=5) and
246
protection of coastal waters (n=3). These projects deliver public goods, but they do not directly
247
generate revenue. For example, the Nordic Investment Bank blue bonds finance both the reduction of
248
nitrogen and phosphorus discharge into the Baltic Sea and the upgrading of drinking water systems to
249
prevent contamination due to climate change-induced downpours and flooding. Investors are not
250
repaid out of project revenues, but rather by the balance sheet of the Nordic Investment Bank,
251
contributed by its eight member countries.
252
We observed a loose relationship between types of issuer, use of proceeds, and coupon rates for the 13
253
blue debt issuances that disclosed financial information. All MDB-issued blue bonds follow a similar
254
model to the NIB bonds described above whereby public goods are funded and investors repaid via
255
balance sheets rather than revenue generated from economic activities or assets funded by the use of
256
proceeds. In contrast, blue debt issued by private sector actors (i.e., financial institutions and
257
corporations) tends to finance projects that directly generate revenue, for example, the development of
258
offshore wind (n=2), water desalination (n=1), green shipping (n=1), and improving the governance of
259
tuna supply chains (n=1). As a result, the bondholders are also repaid through project revenue. As
260
depicted in Fig. 3 below, the two lines represent the (1) coupon rate, which can be explained as the
261
annual interest payment received by a bondholder from the date of issuance until its maturity and (2)
262
the treasury bond rate, or risk-free rate, for the same duration issued by the government. The return
263
over the local treasury bond rate, referred to in finance as the spread over risk-free, increases from left
264
to right in this graph as visualised by the expanding vertical lines. 9 out of these 13 debt issuances
266
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offered a return, or spread over risk free, of less than 1% for the investor. The first 5 issuances, from
Nordic-Baltic blue bond 2 through to the World Bank Sustainable Blue Bond offered spreads of
0.44% or less, implying a small return advantage over buying government bonds. Five of the bonds
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were issued by MDBs and it is no surprise that the returns are lower since they have AAA ratings:
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they are funded by member countries’ tax contributions so can raise money cheaply and the risk to
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
investors is low. For example, the expected returns for the Nordic-Baltic blue bond 2 sits just above
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the risk-free rate of the currency it was issued in: the Riksbank’s reference rate in January 2020 was
272
0.00, explaining the 0.10% coupon offered to investors as a small return for investing in it.
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7
Annual blue bond coupon rate
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Treasury rate matched to blue bond duration
6
5
Figure 3. The spread between the coupon rates and the treasury rates
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There are two outliers in the graph: the Seaspan Blue Transition Bond and the Seychelles blue bond.
SEASPAN USD
Since the return calculation by investors is made based on a combination of long-term government
bond yield, plus a risk assessment of the issuer’s activities and projects, the spread of 3.51% in the
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SEYCHELLES USD
(5 YR) TBH
THAI UNION 2
THAI UNION 1 TBH
NIB 1 SEK
ADB AUD
ot
p
B OF CHINA CNY
IND. B. OF CHINA USD
tn
rin
274
NIB 2 SEK
-1
ADB NZD
0
B OF CHINA USD
1
WB SDBB USD
2
%
3
QINGDAO WATER SOE CNY
ee
rr
4
Seychelles govt repay rate
279
Seaspan bond can be attributed to investors pricing in the business risk inherent in this enterprise.
280
Despite the higher business risk, investor appetite was apparent with this bond 5 times oversubscribed
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
and upsized from USD 500 to USD 750 million. It is worth noting that the favourable coupon rate of
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sovereign blue bonds is enabled by a unique ‘debt swap’ structure to make them comparably
283
investable as other blue debt issued by multilateral development banks and corporates. Using the
284
Seychelles blue bond as an example, it was guaranteed partly by a USD 5 million World Bank
285
guarantee (IBRD) and supported by a further USD5 million loan from the Global Environmental
286
Facility (GEF) which help cover interest payments (The World Bank, 2018a). Once financial
287
guarantees and a credible governance structure were put in place, the Seychelles government’s
288
repayment rate was in effect subsidised and fell to 2.8% upon the condition that savings will be
289
funnelled towards ocean protection. The debt was subsequently underwritten with the guarantees in
290
place, reducing the risk of the investment, and investors were offered an attractive 6.5% return over
291
US treasury rates with the same duration, as evidenced in the graph.
292
Multilateral development banks and The Nature Conservancy (TNC) play a key role in brokering and
293
guaranteeing sovereign blue debts. Following the success of the 2018 Seychelles blue bond, a similar
294
model was deployed to support debt swaps for ocean conservation in Belize, Barbados, and Gabon
295
(Credit Suisse 2022; Maki 2021; Sguazzin and White 2023; The Nature Conservancy 2022).
296
Geographies of Issuers, Financial Intermediaries, and Investors
297
Blue bond issuers are spread geographically, with a high representation of issuers from less developed
298
and emerging economies (see Fig. 4 below). The former is represented exclusively by the low-income
299
small-island or coastal states issuing sovereign blue ‘debt swap’ bonds, all of them with assistance
300
provided by the TNC, multilateral development banks and bilateral grants. The latter is heavily
301
represented by Asian firms. Furthermore, China has not only issued the greatest number of blue debts,
302
but the country also represents more than half of issuance volume globally.
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This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Finland 394
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Ecuador 79
Phillipines 402
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ie
Seychelles 15
China 2337
Thailand 334
ee
rr
USA 402.6
Barbados 73.25
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Figure 4 Total blue debt by issuer country in USD millions 2018-2022
306
Asian corporates and financial institutions, particularly Chinese banks, are active in blue bond
307
issuance. The Bank of China issued a dual currency bond in 2021 (Credit Agricole, 2021a), while the
308
Industrial Bank of China, the largest commercial financial institution green bond issuer in the world,
309
issued its first blue bond, which was 5 times oversubscribed (Credit Agricole, 2021b). In June 2022
310
the Bank of Qingdao announced a new USD150 million blue loan to support up to 50 projects to
311
support the health of oceans and rivers within the Province of Qingdao (ADB, 2022; Proparco, 2022).
312
The facility signifies the first blue ‘loan’ in the world, and was jointly provided by the IFC, the ADB,
313
the German development bank DEG and the French development finance institution Proparco, and
314
adhered to the 2022 IFC Blue Guidelines. It sets a precedent for loan lending, which typically entails
315
private bilateral relationships between borrower and bank, in the blue financing space. Compared to
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bonds, which are typically publicly traded, loans offer smaller-scale firms and projects access to 'blue'
labelled capital.
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305
318
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Outside of China, BDO Unibank in the Philippines issued the first blue bond in the Southeast Asia
320
region (BDO Unibank, 2022). The three non-financial corporate blue bond issuances so far were by
321
Asian firms. Seaspan, a containership company headquartered in Hong Kong announced the issuance
322
of USD 750 million in blue transition bonds in 2021 (Seaspan, 2021). In the same year, Thai Union
323
Seafood Group, a seafood production company listed on the Stock Exchange of Thailand, issued a
324
THB 5 billion corporate sustainability linked blue bond with a follow-on THB 6 billion blue finance
325
corporate sustainability linked bond due to demand (Thai Union, 2021a and 2021b). It is worth noting
326
that these corporate blue bonds have adopted the ‘transition bond’ model where the proceeds are
327
deployed to improve the sustainability performance of the firms, including GHG emissions reduction,
328
improvement of sustainable fisheries practice (in the case of Thai Union), and upgrade of low-carbon
329
fleet and fuel use (in the case of Seaspan). Separately, Chinese state-owned enterprise Qingdao Water
330
Group earmarked its CNY 300 million blue bond for the expansion project of the Qingdao Baifa
331
desalination plant in the coastal province of Qingdao. Despite the strong Asian representation in the
332
current landscape, there are signs that private corporates and financial institutions in other regions are
333
taking up this novel instrument, with the Bank of Ecuador issuing Latin America’s first commercial
334
blue bond in 2022.
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335
Contrasting the strong representation of Asian corporations and coastal, small island nations as blue
337
debt issuers, the demography of financial intermediaries and investors of blue bonds is more
338
geographically diverse (see Table 2). Financial institutions located in Europe were involved in
339
arranging nine out of seventeen issued debts. The arranger refers to the intermediary that underwrites
340
the debt, structures the product, and disperses the investment product to investors. Three out of four
341
Chinese corporate issuances were arranged by French banks. Consequently, French investment banks,
343
rin
such as Credit Agricole, Société Générale and BNP Paribas, arranged 25% of all global blue debts
issued thus far (see Table 3). Simultaneously, the Paris branch of the Bank of China issued its USDdenominated blue bond.
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Table 2: Geography of issuers, arrangers, and investors
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Size of
Head office
Country of origin
Geographic location of
the issuer
debt in
country of the
of the main
financed assets/
USD
arranger
investor
purposes (100% unless
Seychelles
USA
China
specified)
15 USA
USA
28.6 USA
USA
44 China
Seychelles
ev
ie
millions
we
d
Country of
Undisclosed
Undisclosed
Province of Qingdao,
Barbados
73.3 USA/Switzerland/
Barbados
Ecuador
ee
rr
China
79 Ecuador/
Barbados
USA/ Switzerland
Ecuador
ot
p
Switzerland/
USA
Luxembourg
100 Philippines
USA
Philippines
China
150 China
USA/Germany/
China
152 Thailand/Japan
rin
Thailand
tn
Philippines
France
Thailand
Southeast Asia
169 Denmark
Sweden
Baltic Sea
Thailand
182 Thailand
Thailand
Southeast Asia
Finland
225 Sweden
Sweden
Baltic Sea
302 USA/France
Japan
Asia and Pacific
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ep
Finland
Philippines
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
364 Switzerland/USA
Sweden
Belize
China
450 China/France
USA
China
China
750 France
Undisclosed
Global maritime routes
China
943 France
USA
China 95.68%, France and
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USA
Great Britain 4.32%
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Table 3: Lead arrangers on projects
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Issuances
Arranger
Credit Agricole CIB
BNP Paribas
Société Générale
tn
Industrial Bank of China
Bank of Ayudhya
% of market share
3
11%
3
11%
2
7%
2
7%
2
7%
2
7%
ot
p
Credit Suisse Group AG
arranged
We could not obtain publicly available, comprehensive data on the identity of investors in blue bonds.
349
This is unsurprising as investment destinations constitute commercially sensitive, proprietary
350
information. From the information available, investment in blue debt is widespread geographically,
351
with the IFC being a key investor in private sector financial institution issuances in China, the
Philippines, and Ecuador. Financial institutions in Europe and the US have signalled sustained interest
in blue financing. For example, Swedish investors made up 85% and 95% of the two Nordic-Baltic
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blue bonds issued in 2018 and 2019 respectively (NIB, 2020) and Swedish pension fund Alecta
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invested USD75mn in the Belize blue ‘debt for nature’ bond after the US International Development
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Finance Corporation provided insurance (Fixsen, 2022). US-based impact investors Nuveen,
357
Prudential and Calvert Impact Capital invested in the first ever blue bond issued by the Seychelles
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(The World Bank, 2018a) with Nuveen additionally buying 80% of Barbados’s debt for nature swap
359
blue bonds (Christiansen, 2023). Mainstream American asset managers have also initiated blue bond
360
investing, as exemplified by the inclusion of the Bank of China blue bonds in the VanEck Green Bond
361
Exchange Traded Funds (Cbonds, 2023b). Asian investors have likewise shown support for blue
362
bonds issued in the region. For example, Japanese life insurance firms purchased 100% of the Asian
363
Development Bank blue bond (ADB, 2021a), while the Thai government pension fund co-invested in
364
the corporate sustainability linked blue finance bond issued by Thai Union Seafood group (Thai
365
Union, 2021a).
366
Transparency and impact measurement
367
Akin to the lack of a standardised definition of what counts as blue, there is a lack of standardisation
368
over how the environmental benefits of blue debt can be governed. To this end, eight out of the
369
seventeen blue bonds followed the internationally recognised Green Bond Principles.
370
According to the Green Bond Principles, reliable and accurate disclosure of the selection of eligible
371
projects, management of proceeds, and impact is crucial in governing the ‘blue’ credentials of the debt
372
instruments accountable. Our results suggest that disclosure is at best patchy in reality. Fourteen out
373
of seventeen issuers disclosed quantitatively what the bond seeks to achieve environmentally. The
374
level of detail of disclosure varies. Some issuances come with timeframes for target achievement,
375
such as the protection of a specific percentage of coastal waters by a certain timeline (as in the case of
376
the debt for ocean conservation swaps issued by Seychelles, Belize and Barbados) or “Technical
377
specifications consistent with the Poseidon Principles, which is aligned with the International
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Maritime Organization’s (IMO) goal of a least 50% reduction in total annual GHG emissions by 2050
compared to 2008” (Seaspan, 2021, p.13). Others offer objectives without a delivery timetable, for
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example: “The expected overall environmental benefits of eligible projects will include an
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incremental sewage treatment capacity of 6,176,161 million m3/day and an increase of 2,987 MW
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
installed capacity for wind power project” (Bank of China 2020, p.2). Some targets are even more
383
opaque due to the wide variety of categories that are eligible for the use of proceeds. This is evident in
384
the Asian Development Bank blue bond where 9 themes are specified including for example: “Solid
385
waste management. Projects that reduce marine debris and/or associated impacts to marine life.
386
Projects must be within 50km of the coast or a river that drains to the ocean” (ADB, 2021a, p.1).
387
In addition to disclosure, obtaining independent verification provides further assurance of the quality
388
and ambition of the environmental benefits that the bond promises to deliver. Independent verification
389
providers abound, but it is worth noting that all multilateral development bank issuances (i.e. Nordic
390
Investment Bank and Asian Development Bank) use CICERO, a Norwegian sustainability verification
391
company that was acquired by S&P Global Ratings in December 2022. CICERO takes a unique
392
‘shades of green’ approach that is often deemed rigorous, in that debts that fail to align and contribute
393
to a low carbon future will be called out in the ranking system. In contrast, corporate actors use a
394
range of independent verification providers, including Sustainalytics, Ernst and Young China, and
395
Lianhe Equator Environment Impact Assessment Co. However, it is notable that only NIB is
396
publishing the environmental impact of their blue bonds by publicly reporting the actual reductions
397
measured in nitrogen and phosphorus discharge into the Baltic (NIB, 2022).
398
Debt for ocean conservation swaps adopt a different governance structure to corporate blue bonds. In
399
addition to publicly disclosing their targets and commitments, debt swaps are governed by multilateral
400
governance bodies set up as a condition of the blue bond. For example, the marine conservation
401
progress of the Seychelles blue bond is overseen by the Seychelles’ Conservation and Climate
402
Adaptation Trust (SeyCCAT), while the Belize and Barbados blue bonds are governed by respective
403
trusts. These multilateral governance bodies are typically made up of the debt issuance country, as
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well as representatives from the TNC, private sector actors, and civil society.
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This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Discussion: Navigating an Innovative ‘Turquoise Zone’ for Blue Bonds
407
At the beginning of this article, we posited that the emergence of blue bonds presents a new opportunity
408
to reimagine the purposes, practices, and governance of sustainable debt. Establishing a separate ‘blue’
409
label could draw attention to ocean conservation and protection investment, which has often been
410
overlooked in the sustainable debt world where clean energy and green infrastructure investments
411
dominate (CBI 2022). Furthermore, establishing a fresh ‘blue’ label opens an opportunity to establish a
412
new set of eligibility criteria and governance practices to ensure blue bonds are delivering measurable,
413
ambitious benefits to marinescapes, thus differentiating blue bonds from the broader sustainable debt
414
universe, which has been plagued by concerns of greenwashing, owing to the lenient eligibility and
415
reporting requirements.
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At the outset, the growing range of blue debt issuers and investors getting involved in the diverse debt
418
structures point to the blossoming of innovation and a promising trajectory of the concept of blue debt
419
gaining traction. Moreover, unlike the broader sustainable debt universe, where issuance and investment
420
emerged and remain concentrated in Europe (CBI 2022), we found a strong representation of blue debt
421
in Asia, as well as coastal, small island states, which also points to broadening engagement with
422
developing economies.
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417
423
Upon closer inspection, our analysis points to two distinctive but overlapping coalitions of stakeholders,
425
advocating divergent practices and visions for blue debt development. Borrowing from the concept of
426
financial ecologies, where the financial system is framed as a coalition of smaller constitutive ecologies
427
that emerge, endure, or fade away dependent on their uneven connectivities and influence (Lai 2016;
429
Langley and Leyshon 2017), we can conceptualise the current state of blue debt development as two
‘ecologies’ of financial knowledge and practices. The objectives, strategies, and early outcomes of these
distinctive groupings of blue finance entrepreneurship deserve deeper scrutiny over whether they truly
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424
431
lead to equitable and effective outcomes of protecting marine ecosystems and community livelihoods
432
that rely heavily on them.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
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The first ‘ecology’ is instigated by multilateral development banks and targets private sector issuers,
435
such as corporates and financial institutions. Led by the Nordic Investment Bank and the World Bank,
436
this coalition of actors seeks to deploy the novel ‘blue’ label to mobilise private capital to exclusively
437
support ocean clean up, protection, and conservation. They argue that the economy is heavily reliant on
438
a healthy marine ecosystem, therefore it makes business sense to use the ‘blue’ label to demarcate
439
investments dedicated to ocean protection and conservation. To this end, the World Bank, through its
440
private sector-facing arm, the IFC, introduced definitions and guidelines to align the definition of blue
441
finance with the UN Sustainable Development Goals 6 and 14, and to harmonise the governance of blue
442
bonds with the familiar and market-friendly Green Bond Principles.
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434
443
The World Bank is an ‘incumbent’ actor in the green bond market, and its involvement in blue debt
445
development has led to the implementation of existing green bond governance modalities in the blue
446
debt world. Notably, the World Bank advocated for the adaptation of ‘use of proceeds’ model and
447
voluntary reporting of the environmental benefits prevalent in the green bond world. A key benefit of
448
adopting these approaches lie in user-friendliness and familiarity, but both academic and industrial
449
literature have pointed to their limitations in ensuring consistent, auditable disclosure to hold issuers
450
accountable for the delivery of positive environmental outcomes of (e.g. Bloomberg 2019; Perkins
451
2021). Our findings on the impact tracking and reporting of blue debt suggest that limitations of green
452
bonds have perpetuated into the blue bond space.
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453
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444
Furthermore, despite the World Bank’s effort to standardise the eligibility of ‘blue’ finance, our results
455
found a much broader range of use of proceeds emerging from corporate issuers, such as
456
457
decarbonisation of shipping fleets, offshore wind energy generation, and seawater desalination.
Although these assets are physically located in marine spaces, they do not directly contribute to SDGs
6 and 14, and such projects have been financed through green bonds elsewhere. While ‘blue’ and ‘green’
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459
are not mutually exclusive, this debate on what constitutes ‘true’ blue and whether blue finance should
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
exclusively be dedicated towards ocean clean-up and marine conservation suggests that there is still a
461
lack of consensual definitions of blue finance. The negotiations of boundaries in this ‘turquoise’ spaces
462
open up for opportunistic private actor players to push the boundaries and adopt the blue finance label
463
on a more permissive range of projects to capitalise on this marketing opportunity.
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Our analysis of the loose relationship between the use of proceeds and coupon rates offers some
466
explanation as to why some private sector issuers are motivated to expand the definitional boundaries
467
of blue bonds. Marine conservation projects such as restoration of water health and ocean conservation
468
tend not to directly generate revenue to repay its debtors. These projects are predominantly financed by
469
multilateral issuers who repay bondholders via their organisation’s balance sheet. In contrast, assets
470
such as offshore renewable energy and seawater desalination typically operate on a significant scale
471
with a steady revenue stream, thus making them relatively straightforward to be structured into an
472
attractive, ‘investable’ debt instrument. The fact they physically operate in the marinescape and are
473
already well-recognised by sustainable debt investors, allows corporates to capitalise on the novelty of
474
the ‘blue’ label without taking on additional risks. The ever-widening boundaries of what constitutes
475
‘blue’ could lead to domination of lucrative or ‘investable’ marine assets and projects in the blue finance
476
space, thus defeating the initial purpose of establishing this new ‘blue’ debt label to attract private
477
capital towards marine conservation and protection.
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465
478
In comparison, the second ‘ecology’ appears a more explicit attempt to mobilise untapped private
480
capital towards marine conservation. Led by The Nature Conservancy, the US’s wealthiest conservation
481
charity, this coalition is made up of multilateral development banks, private sector financial institutions,
482
and coastal and small island states. The TNC targets small coastal and island states with rich marine
484
ecosystems that are also vulnerable to debt default, especially after the Covid-19 pandemic when
tourism, a main source of GDP, dwindled. Nature debt swaps offer governments of these debt-
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479
486
vulnerable states a way to avoid sovereign debt default and reduce future borrowing costs, upon the
condition that fiscal savings will be dedicated to marine conservation.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
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TNC’s brokerage of nature debt swaps has been hailed for its sophisticated financial engineering to
489
deliver a ‘win-win’ for both ocean conservation and debt-burdened states. However, such praises tend
490
to overlook the uneven power dynamic and political implications of the TNC leveraging on a nation’s
491
debt to impose their conservation objectives and preferred conservation approaches upon a sovereign
492
state. An integral part of TNC’s debt swap condition is the creation of Marine Protected Areas, where
493
certain types of economic activities such as fishing are limited or prohibited to achieve conservation
494
targets. To ensure the conditions of the debt swap are honoured, the TNC sets up multilateral trusts or
495
boards set up by the TNC, where the government only makes up a minority representation.
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Though scarcely discussed (except in a blog post by Uneven Earth published in 2021), this structure in
498
essence infringes the sovereignty of these creditor states. Rather than implementing conservation targets
499
and strategies through the creditor state’s democratic procedures, the TNC used the risk of sovereign
500
default as leverage and sidestep any form of democratic procedures to implement their conservation
501
objectives. Furthermore, we did not find any publicly available evidence of consultation with local
502
leaders or communities over the setting up and subsequent governance of Marine Protected Areas,
503
despite history evidencing that similar protected areas have impinged the rights and livelihoods of fisher
504
people (Ban and Frid 2018; Silva and Lopes 2015). The fact that the debt swap was spearheaded by the
505
TNC means it is not subject to the United Nations’ best practices of obtaining free, informed, and prior
506
consent from local communities, which is crucial in avoiding neocolonial imposition when investing in
507
developing nations (Anderson 2011). This structure of conditional financing resembles the conditional
508
aid provided by Bretton Woods Institutions in the post-war era to less economically developed nations
509
to put in place neoliberal policy infrastructure and institutions, which often led to economically and
511
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socially devastating outcomes. Only that, in this case, the conditions are set by a private, wealthy charity
headquartered in the US, with very limited accountability to any governments, or indeed the people of
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510
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Seychelles, Belize, or Gabon.
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
Finally, it is worth noting that private financial institutions underwriting and investing in blue debt
514
swaps are receiving a market-competitive coupon rate. This is possible because the debt has been
515
derisked by multilateral development banks. While this model has been hailed for its innovation, its
516
complexity and reliance on public finance derisking and guarantees raise the question of scalability. It
517
also suggests that blue debt has fallen short of incentivising the financial sector to fully internalise the
518
true value of marine ecosystems and the service they provide.
519
Conclusion
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As blue debt becomes more widely adopted internationally, our study presents a timely investigation
521
of the development and evolution of this new category of sustainable finance instrument. Our research
522
suggests the current landscape of blue debt is rapidly evolving and highly fluid, and this fluidity
523
comes with epistemic, as well as environmental and social justice implications: scientifically complex
524
and politically laden decisions about what a sustainable future looks like are delegated to banks and
525
financial institutions.
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Our paper identified tensions between divergent stakeholder priorities in the private sector, the
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development sector, and the conservation sector. In turn, these tensions are manifested in the uneven
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approaches to defining the boundaries of blue, in the profitability of different debt instruments, as well
530
as in the methodology of tracking and reporting of the environmental impact of the debt. The
531
opaqueness of blue bond governance poses the risk of ‘blue’ washing, and the asset class losing its
532
focus to mobilise and channel private capital towards the under-financed ocean conservation space.
533
Furthermore, the exclusion of local communities in the processes of determining the use and
534
management of proceeds of the debt instruments poses risks of maladaptation by neocolonial
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environmental governance.
Our intention to level these criticisms is not to undermine the innovation or necessity of this emergent
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market. Rather, we seek to identify any shortcomings and teething problems to open up the space for
539
productive discussions and improvement. Blue finance holds a unique potential in drawing investor
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
attention to ocean conservation and sustainable development of marine resources, and this is a space
541
that has traditionally been overlooked notwithstanding its importance to supporting livelihoods and
542
economies, as well as in delivering global climate, biodiversity, and sustainable development goals.
543
Our critiques bear broader lessons for emergent sustainable financial innovations seeking to reform
544
the relationship between capital, nature, and society, to channel investment towards under-invested
545
sectors, ecosystems, and geographies that hold the key to meeting global sustainable development
546
goals.
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Going forward, more clearly defined eligibility boundaries and governance standards should be set
549
around blue finance to ensure traceability, accountability and equitable benefits sharing as capital is
550
(re)directed towards ocean protection and marine conservation purposes. Importantly, blue financing
551
must ensure local community consent, engagement and empowerment. Moreover, to avoid ‘blue
552
washing’, issuers should apply more rigorous methodologies to track and measure the environmental
553
impact, such as the deployment of (near)real-time spatial or ground-truthing techniques.
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Our research provided a comprehensive analysis of the early development of the blue bonds market.
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Future research would benefit from an end-to-end deep-dive of a blue bond: from the bottom up of
557
measuring environmental improvements and community uplift (even after the blue bond matures), to
558
the governance of benefit distribution and allocation of proceeds, to the financial engineering,
559
brokerage, and trading. In order to more thoroughly understand the role finance can play in
560
contributing to nature recovery and other sustainability goals, it is crucial to understand how divergent
561
environmental and economic priorities held by different actors manifest throughout the cycle of
562
investment and impact generation. To do so would require a broad range of expertise including but
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not exclusive to financial geography, (marine) ecology, and anthropology. To this end, we call for an
interdisciplinary research agenda in sustainable finance to assess the outcome and critically evaluate
the implications of financial capital shaping global terrestrial, marine and aquatic landscape as we
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navigate the unprecedented ecological challenges in the Anthropocene.
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This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4509317
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