An innovative approach to financing Blue Economy is through Bonds. Last year, Seychelles, an island nation in the Indian Ocean announced at the World Ocean Conference at Bali that it was issuing Sovereign Blue Bonds to help the country develop blue economy through public and private investments. Further, this initiative was supported by the World Bank and the Global Environment Facility who had committed US $5 million each as guarantee and concessional loan respectively. The World Bank also assisted the Seychelles government to connect with global capital markets and identified three investors i.e. Calvert Impact Capital‚ Nuveen and Prudential and raised US $15 million.
Seychelles Sovereign Blue Bond initiative turned out to be a promising venture and encouraged several such initiatives. Early this year, Nordic Investment Bank, an international financial institution of the Nordic and Baltic countries, announced “Nordic-Baltic Blue Bond”. The Bond was oversubscribed more than two times and raised SEK 2 billion to help get a better understanding of the challenges of the Baltic Sea ecosystems and finance projects such as “wastewater treatment, prevention of water pollution and water-related climate change adaptation”.
Likewise, Morgan Stanley & Co. LLC., sold World Bank (International Bank for Reconstruction and Development, IBRD, Aaa/AAA) Sustainable Development Bonds worth US $10 million to address the growing menace of plastic pollution in the oceans and seas.
A similar financial venture i.e. ‘Blue Bonds for Conservation’ has been announced by The Nature Conservancy (TNC), an international not-for-profit group. It plans to muster US $1.6 billion to support global ocean conservation efforts. The TNC model is based on the idea of refinancing under which national debt of island and coastal nations is serviced by TNC and the governments are able to use this money for marine protection, revitalize fisheries and protect coral reefs. Currently, 20 island nations are enjoying the benefits of this model and TMC believes that as many as 85 countries could use this approach to protect water bodies under their jurisdiction.
Blue Bond is a financial instrument and solely meant for financing ocean related projects. It is a ‘debt instrument’ under which ‘governments, development banks or others financial institutions raise capital from impact investors to finance marine and ocean-based projects that have positive environmental, economic and climate benefits’. Such types of Bonds give confidence to Capital markets and global financial institutions to take the stewardship of promoting and helping countries develop blue economy. It is also their way of supporting international efforts to protect oceans, ensure that they are clean and the resources are harnessed in a sustainable manner. Many more investors and recipient countries can be expected to support Blue Bonds in the future to engage in the sustainable management and development of oceans.
It is useful to mention that the oceans and seas are repository of enormous wealth and the commercial value of goods and services generated by these water bodies is estimated to be between US $3 trillion to $6 trillion. It provides employment and livelihoods opportunities for a large number of people, and in the business as usual scenario, blue economy is expected to generate approximately 40 million full time equivalent jobs by 2030.
The concept of blue economy has resonated among the Bay of Bengal littoral countries for several years now. The respective governments have internalized the concept and the policies and pronouncements acknowledge their national commitments to use the resources of the sea for socio-economic development of their people albeit in a sustainable manner. However, the biggest challenge for these countries is about financial investments that can be committed to develop blue economy. Barring India, most of these countries are at various stages of development and have different priorities particularly food and water security, education and health, and they must address and mitigate the challenges of climate change. Consequently, the investments in sea related industries such as fishery, shipping, ports, shipbuilding and offshore energy are quite modest.
Last year, the World Bank announced Sustainable Development Bond series to ‘raise awareness on the critical role of ocean and fresh water resources’. The Bond Fund is estimated (August 2018) to be around US $3.7 billion and is to be supplemented with US $1.5 billion under which regional fisheries programs in Africa and the Pacific were to be implemented. The fund also envisages addressing ‘sources of marine pollution, protecting critical marine habitats and supporting coastal development worldwide’.
It is useful for the Bay of Bengal littoral countries to tap into the World Bank’s active Blue Economy portfolio. Also, big country like India can be proactive and the government can support Blue Bonds for the Bay of Bengal that can help regional countries to pursue ocean related projects. This would be in partnership with major industrial houses and impact investors to raise capital and could be listed on the national stock exchange. Furthermore, these Blue Bonds could also support the national vision of the five trillion dollar economy announced by the Indian Prime Minster.
Dr Vijay Sakhuja is associated with The Kalinga International Foundation, New Delhi.