The objective of COP 15 is to develop a new framework for global action to protect and restore nature. Preserving the oceans, which cover more than two-thirds of the Earth's surface and absorb almost one-third of the CO2 emitted by human activities, are a key part of the process. Blue finance has emerged to help preserve marine ecosystems by combining committed private sector stakeholders and public investment.
What exactly is blue finance?
In accordance with the 14th sustainable development goal (SDG) promoting the conservation and sustainable use of the oceans, seas and marine resources for sustainable development, blue finance tackles the specific issues involved in protecting the maritime and coastal environment and marine biodiversity. Its main principles were set out in 2018 by the European Commission, UNEP-FI, WWF, the World Resources Institute (WRI) and the European Investment Bank (EIB).
A first project to protect the marine ecosystem in China
In 2022, Proparco granted its first blue line of credit to China-based Bank of Qingdao. With extensive previous experience in green finance (Green Bonds), Bank of Qingdao is growing its sustainable finance business by focusing on blue finance, given its location in a coastal province. This US$ 150 million blue financing initiative, headed up by International Finance Corporation (IFC) in partnership with the Asian Development Bank (ADB) and Germany's private sector development finance arm (DEG), will enable the China-based bank to get more than 50 blue finance projects up and running by 2025.
Raphaël de Guerre, Proparco Regional Director for North and South-East Asia who has worked on this project out in the field, explains that “the project is aiming to have a strong positive impact on sustainable development in the coastal areas of China's Shandong province which have suffered greatly from marine pollution and the consequences of climate change.” Targeted impacts include reducing volumes of untreated marine waste and wastewater, reducing plastic pollution, preserving water resources and improving fishing practices.
Blue Loans, Blue Bonds: how blue finance actually works
As Eduardo Dias Aguilar, Senior Investment Officer with Proparco explains “Blue Loans and Blue Bonds are innovative financing instruments that allow to allocate all funds raised to projects designed to protect our oceans and water resources”. However, blue finance is very broad in its scope, covering all economic activities related to oceans, seas and their coasts, including decarbonising transport, offshore renewables, pollution reduction, restoring marine ecosystems, sustainable blue biotechnologies, water treatment, sustainable fishing and eco-tourism.
Paul de Montmorillon, Senior Investment Officer with Proparco, believes that “another innovative aspect of the Bank of Qingdao project is the deployment of a brand new tool – a Blue Bond Framework – that clearly specifies eligibility criteria for fundable projects.” The Framework, which sets out 27 activities classified into 7 sub-categories, is the outcome of extensive technical assistance provided by IFC to Bank of Qingdao and should serve as an important benchmark for future blue finance operations.
Blue finance: a pioneering sector
The Bank of Qingdao project is the first blue financing operation funded by the Agence française de développement’s (AFD) group and its private sector financing arm Proparco. It complies with United Nations Environment Programme (UNEP) blue economy financing principles which the Group signed in early 2022. Paul de Montmorillon adds that “protecting marine biodiversity is a key focus of AFD Group. Proparco is currently looking at a second project to provide blue financing in Latin America.”
Blue finance is set to grow rapidly given the urgency of the related environmental, social and economic issues. Eduardo Dias Aguilar feels that “we can be proud of what we have achieved on this first blue finance operation. This will probably encourage other investors to commit to this type of financing".