18 March 2025
Blue Bonds: Fuelling Marine Sustainability
Marine ecosystems play a crucial role in sustaining life on our planet. From providing food and livelihoods to regulating the climate and supporting biodiversity, the marine environment is invaluable. However, it faces major threats to the delicate balance of its ecosystems, from overfishing, pollution, ocean acidification, and marine traffic to coastal development and climate change, among other things.
In the face of these challenges, a new financial instrument — blue bonds — has emerged as a potential solution to ensuring maritime resources are used sustainably and for attracting investment into new and innovative technologies. From zero-carbon shipping and renewable energy to the restoration of reefs and barrier islands, there is a wide range of applications for such financing. This article explores the value of blue bonds as a financial instrument for driving investment in sustainable development and marine protection now and into the future.
“A healthy ocean is not only a vital carbon sink and home to 80% of all life on earth; it can also be a source of innovation to improve climate, nature, and livelihoods. Blue bonds are a crucial instrument to deliver financing for marine-based solutions such as clean energy, transport, and food systems.”
Sanda Ojiambo, CEO and Executive Director at UN Global Compact
What are blue bonds?
Blue bonds are a type of financial tool designed to support investment in the sustainable use and conservation of marine resources. Like green bonds, which fund environmental projects, blue bonds are specifically targeted at initiatives that aim to protect and restore the health of oceans and other aquatic ecosystems. Sustainable Development Goal 14 (SDG 14) is one of the 17 goals set by the United Nations in 2015.
SDG6 is about clean water and sanitation and aims to ensure the availability and management of water and sanitation for all. There are eight specific targets to be achieved by 2030, and we highlight the target to protect and restore water-related ecosystems.
SDG 14, is known as ‘Life below water’, and aims to conserve oceans and seas and use marine resources for sustainable development. This goal comprises ten specific targets to be achieved by 2030, with progress measured through corresponding indicators.
Blue bonds provide capital for projects such as marine-protected areas, sustainable fisheries, and pollution control, addressing key environmental challenges and promoting the health and longevity of the blue economy. Sovereigns, development banks, quasi‑sovereigns, and corporate issuers, among others, can finance projects to protect and manage their marine ecosystems sustainably.
In 2018, the Republic of Seychelles launched the world's first sovereign blue bond, raising USD15 million to support the blue economy of the island nation. This was followed by the issuance of its second blue bond in 2020, which raised USD15 million to finance marine conservation and climate adaptation projects, such as coastal protection.
The Seychelles blue economy strategic policy framework and roadmap were crucial in the success of the blue bonds issuance, offering a detailed investment strategy before the bonds were issued.
Upgraded vessels, ports, and infrastructure
Marine businesses that are transitioning their business models to align with the objectives of Paris Agreement can access financing to support new and innovative technologies.
The capital raised through blue bonds can be directed towards upgrading vessels, ports, and marine infrastructure to better support climate resilience. This includes retrofitting ships with technology that reduces emissions, enhancing port facilities to handle cleaner energy sources, and building infrastructure that can withstand the impacts of climate change. These improvements reduce environmental impact and, typically, lower the risk of insuring these assets.
The bonds can be used to finance initiatives that reduce the environmental impact of shipping operations, such as the development of cleaner propulsion systems, enhanced fuel efficiency technologies, and the transition to renewable energy sources.
A moonshot moment
Decarbonisation is complex and requires innovative collaboration. Initiatives like the Zero Emission Maritime Buyers Alliance (ZEMBA) and the First Movers Coalition are critical. ZEMBA, co-founded by The Aspen Institute, Amazon, Patagonia, and Tchibo, aims to accelerate the deployment of zero-emission shipping through advanced market commitments, stimulating investment and regulatory action.
Cargo owners play a crucial role in driving demand for zero emission solutions, as their willingness to pay and collaboration can catalyse faster action. ZEMBA’s approach involves a multi-step procurement process to secure the best deals for zero-emission shipping services. This initiative is expected to reduce nearly 1 million tons of carbon emissions over three years by procuring 600,000 twenty-foot containers (TEU) on zero emission vessels.
The First Movers Coalition complements these efforts by harnessing purchasing power to decarbonise hard-to-abate sectors, driving supply availability, and scaling up clean energy technologies. Collaborative procurement, demonstrated by ZEMBA, showcases the essential strategies needed to address climate challenges and transition the maritime sector towards a zero-emission future.
Risk Management Needs
The burgeoning market for carbon credits offers several industry-wide opportunities:
Coverage for eco-friendly shipping companies
As part of their risk management strategy, marine insurers may look to prioritise coverage for shipping companies that are actively reducing their carbon footprint. This approach supports environmental sustainability and aligns with emerging regulatory requirements and market trends that favour eco-friendly practices.
Addressing the volatility of polluting assets
Ageing and poorly maintained vessels are more likely to face regulatory penalties, operational restrictions, and market rejection, which can result in a higher frequency and severity of claims.
Blue bonds play an important role in ensuring that marine assets — such as offshore energy platforms — are properly maintained as they approach the end of their lifecycle, for instance.
Climate and nature risk exposure
Carbon emissions from the maritime sector contribute to climate change, which aggravates climate-related risks such as severe weather events, rising sea levels, and ocean acidification. Climate change is one of the drivers of nature degradation which results in the disruption of marine ecosystems.
The marine industry faces significant environmental threats, including overfishing, pollution, and habitat destruction. Blue bonds provide the financial means to address these challenges and protect the industry from further degradation. By supporting projects that restore and preserve marine ecosystems, blue bonds play a crucial role in safeguarding the industry against environmental threats. They also indirectly help build resilience to extreme weather events by preserving natural coastal defences, such as mangrove forests and coral reefs.
Risk management and sustainability – two sides of the same coin
Insurance can transform a higher-risk bond into a more secure investment, attracting more investors and increasing the availability of capital, which benefits the overall market. By sharing the risks associated with blue bonds, marine insurers can provide financing companies with a unique opportunity to invest in the future of global shipping.
By improving the credit profile through insurance, bonds become more appealing to a broader range of investors. This increased investor interest can lead to greater participation and more funds being available in the capital markets. Investing in blue bonds aligns with the long-term interests of marine insurers by promoting ocean health and resilience.
Crucially, there is a strong link between the type of projects that attract blue bond financing and risk management. Healthier ocean ecosystems are less vulnerable to catastrophic events that can lead to significant insurance claims. By insuring projects that preserve and restore marine environments, carriers directly contribute to the stability and sustainability of their underwriting portfolios.
Case study Reducing the debt of Belize: Preserving its marine ecosystems
Belize, a Central American nation with a population of roughly 400,000 and a 2022 debt-to-GDP ratio of 113%, is home to the second-longest barrier reef in the world, a UNESCO World Heritage Site. Although Belize's debt was not investment-grade, AXA XL led a panel of private political risk insurers to reinsure a blue bond loan so it could achieve an investment-grade rating.
With a USD364 million loan from Credit Suisse, the consortium purchased USD553 million of Belize’s debt. The U.S. International Development Finance Corporation underwrote the primary political risk insurance, while AXA XL and other carriers provided USD610 million in facultative reinsurance. This reduced Belize’s overall debt by USD250 million, helping to preserve the health of its marine ecosystems.
Blue bonds are a compelling financing instrument that has wide application, allowing maritime companies to secure their interests while promoting the sustainability and resilience of marine ecosystems and emerging economies.
By investing in blue bonds, marine organisations can drive innovation and support projects that restore and protect vital ocean habitats, contributing to the global fight against climate change. This is an opportunity for you to lead the way in sustainable practices, ensuring long-term environmental health and economic stability for future generations.
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Mike Ingham, Alec Russell and the Climate Resilience Team
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