Nexus between Blue and Gender Financing: A State of the Market Analysis

Spanning from February to June 2023, our study’s methodology was two-fold: a desk review of quantitative data combined with one-on-one interviews with blue finance stakeholders. Through desk reviews, we leveraged diverse sources of information such as press releases, reports, bond offering documents, issue briefs and the Green and Sustainable Bonds data set from the Refinitiv Workspace, which is sourced from the Climate Bonds Initiative Green Bond Database. These sources helped shape the study's foundation by identifying key players and trends. Simultaneously, stakeholder interviews with arrangers, investors, issuers, and thought leaders offered practical perspectives. The interviews, numbering twenty, offered invaluable insights into the processes, challenges, and potential of blue finance instruments. Moreover, they highlighted the convergence of blue financing with broader sustainable debt finance narratives. This blend of quantitative data and conversations with industry experts helped us bridge the knowledge gap on this novel segment of fixed income strategies.

So, what have we learnt from this study?
 
Since the inaugural sovereign blue bond in 2018, blue finance debt instruments have gained traction today, culminating at over 50 issuances and nearly USD 10 billion of capital raised to finance sectors of the blue economy across the globe in a wide range of projects related to blue infrastructure, ocean conservation, circular economy, sustainable ports, and shipping, to name a few. Asia's contribution to this market is notable, with over 50% of volumes originating from the region.
 
The region's surge in blue issuances has emanated from sovereigns, banks, corporations, and development financial institutions (DFIs). Sovereigns and DFIs, as vanguards of the blue finance movement, have assumed roles as advisors and investors in blue bonds and blue loans. But capital has also flowed from private institutional channels such as banks, impact asset managers, and insurance companies, further solidifying the foundation of blue-themed financial instruments.
 
While blue-labeled instruments are still building their track record, our study unveils the potential for scaling up blue finance to levels witnessed by the green bond market. As such, the financing of projects within the blue economy has been embedded in green bond and loan issuances historically – a segment of the market we identify as “blue-aligned green bonds” in our study. Thanks to historical data and context of green debt issuances, we estimate that USD 258 billion of green issuances (856 in number) have been used to finance blue sectors and use of proceeds since 2007 worldwide.
 
This demonstrates a strong link between novel debt issuances labeled as blue and the more established green financing market. Benefiting from more than a decade of green issuance has set the stage for market expectations and convergence of blue financing around the debt issuance process, allocation and management of proceeds, and impact reporting. While the definition of what constitutes blue in terms of eligibility criteria and impact is still being debated in the market today, emerging blue frameworks such as those developed by the International Finance Corporation (IFC) and the Asian Development Bank (ADB) are a handy starting point to calibrate blue investments against their green counterparts.

In the grand scheme of things, the USD 10 billion of cumulative blue issuances remain far from the trillions needed to protect our oceans. However, recent landmark agreements to protect our oceans offer hope for a thriving blue economy by 2030, and one that is abounding with investment opportunities in the fields of marine transportation, marine ecosystem protection, marine renewable energy, and sustainable aquaculture.  

Eyeing the 2030 agenda for sustainable development, Life Below Water remains the most underfunded of all the sustainable development goals (SDGs). Its interlinkage with other goals such as SDG 5 (Gender Equality), SDG 6 (Clean Water and Sanitation), and SDG 13 (Climate Action), among others, brings forward the importance for blue financing mechanisms to attract additional capital at scale. Echoing the success of green bonds is a journey that won’t be without its challenges. As such, our study indicates that catalyzing transformative change hinges on several key factors:  
 

• The establishment of globally accepted standards for the blue financing market, ushering in a need for clarity and uniformity.
• The importance of innovative funding structures, de-risking mechanisms, and quantifiable impact metrics to navigate the complexity of blue sectors, projects, and financing requirements.
• Actionable guidance on gender lens integration into blue bond issuances, to support inclusivity within blue finance practices.

 
Unfortunately, the latter factor has seldom been visible in the last five years. While women are vastly embedded within the blue economy in sectors such as fisheries, marine tourism, and aquaculture, there remains a notable void in integrating gender-focused indicators into blue finance-related SDGs. For investors, the added layer of complexity that gender considerations bring to fully grasp the blue financing product at hand has often led to a prioritization of climate ambition over gender equality. However, and when zooming in, it is encouraging to see a growing discussion around gender and climate investments, a nexus which is catching the interest of the sustainable finance industry.
 
Following in those footsteps, real-world progress of integrating gender into blue transactions is also happening through examples of issuances in Asia and elsewhere. DFIs such as the ADB or IFC are taking tangible steps to embed gender considerations within their investment strategies. This entails incorporating gender perspectives into project design, creating gender action plans, and fostering equality through lending practices. Notable instances include ADB’s respective investments in Cambodia's Fourth Greater Mekong Subregion Corridor Towns Development project and Qingdao Bank’s blue bond, or the more recent loan from the IFC to Produbanco in Ecuador.
 
Such best practices enhance the significance and replicability of gender analyses and action plans and pave the way to steer blue finance towards a more inclusive horizon.

Drawing on our conclusions, "Financing the Blue Economy in Asia" is our call to action for fostering needed changes to advance blue financing mechanisms, building on latest data and perspectives from market participants.

Acknowledgements: Collaboration is at the heart of this study. We wish to acknowledge Anisha Anantapadmanabhan for her contributions as one of the co-authors of this study. We also extend our gratitude to all industry stakeholders who shared insights, enriching the study with their expertise.