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Why the Hot New Shade for Green Bonds Could Be Blue

Photographer: Maika Elan/Bloomberg

Few places in the world have greater need for financing to fund water projects and protect the oceans than the Indo-Pacific region, with its vast coastlines and countless islands, many at risk from rising sea levels due to climate change. Enter so-called blue bonds -- similar to wildly popular green bonds but focused on such challenges as sustainable fishing and reducing plastic waste. Pioneered in 2018 by the Seychelles, an archipelago in the Indian Ocean, the concept is still relatively rare but catching on as more nations set their sights on improving water resources and marine life. The initiatives add to an already dizzying array of ethically themed debt that’s kept growing.

Basically, it’s when the funds raised are used for a specific purpose that involves water, such as ocean preservation, sustainable fishing or waste management. Blue bonds can be considered a sub-category of environmental, social and governance (ESG) finance, with the “use of proceeds” set out in the offering documents. The securities form part of the so-called blue economy, a concept backed by the United Nations, Asia-Pacific Economic Cooperation and others that blends responsible economic growth and protecting the world’s seas.