According to the Oceanic Institute, over 70 percent of the earth’s surface is ocean, and billions of people in the world depend on the oceans for their livelihoods. Among our communities, people living in the islands, those living in the coastal areas and those nearby lake shores and rivers derive most of their socio-economic activities and livelihoods on the waters – either by fishing, or irrigation, transport, or energy production, etc.
Maritime transport remains an essential part of international trade as over 90 percent is carried by the seas, according to the United Nation’s (UN) International Maritime Organization. So, it is fair that our political leaders’ emphasis about the need for our public and private sector to leverage on our geographical local in line with the current mega trend, as they also relate to global sustainability goals and sustainable finance.
The renewed attention on the ocean in recent years is reflected in the UN-Sustainable Development Goals, especially Goal Number 14 which aims to “conserve and sustainably use the ocean, seas and marine resources for sustainable development”.
The blue economy is of growing importance and gaining momentum amongst policymakers across the world. This is not surprising as the ocean and sea is a significant wealth generator for many economies that have made use of it, estimated at an annual value of US$ 1.5 trillion.
However, the effects of climate change, human activities and other burdens can be felt by the seas, as the world have lost nearly half of its coral reefs, largely due to human activity. Coral reefs are extremely important to the biodiversity of the oceans as they support a quarter of all marine species and hundreds of millions of people rely on them for their livelihoods, nutrition and socio-economic well-being. Given the immense size of the oceans, seas and marine — how can we unlock the potential of the ocean economy while also protecting its marine environment?
Innovative financing of the blue economy
Our 3rd Five Years Development Plan, the Financial Sector Development Masterplan and the recent Budget Speech by the Minister for Finance and Planning all indicate our desire to pursue innovative alternative financing source for our sustainable development. Some of the innovative financial products mentioned in these documents include blended finance, infrastructure bonds, municipal bonds, green bonds and blue bonds. Some of these instruments (green bonds, blue bonds and social-impact financial instruments) are aligned with the current global megatrend – which is a good and relevant direction we are taking as the economy, i.e., the movements towards sustainable finance model (considering environmental, social issues and governance).
As it relates to the blue economy, innovative financial solutions will be required to enhance ocean and coastal resilience. Blue finance, in particular blue bonds, have huge potential to help surmount these challenges. Blue bonds are an innovative ocean financing instrument whereby funds raised are earmarked exclusively for projects deemed ocean friendly. They are designed to support the blue economy such as sustainable fisheries projects, conservation of marine resources, protecting marine environment, etc.
The Republic of Seychelles was the first to launch the world’s sovereign blue bond back in 2018 raising a total of $15 million to advance the small island state’s blue economy. The World Bank helped design the bond.
Since then, Nordic Investment Bank, the international financial institution of the Nordic and Baltic countries, launched a “Nordic-Baltic Blue Bond” raising SEK2 billion for projects such as wastewater treatment, prevention of water pollution and water-related climate change adaptation.
Recently, Morgan Stanley, working with the World Bank sold $10 million worth of blue bonds with of the aim solving the challenge of plastic waste pollution in oceans.
The international not-for-profit group The Nature Conservancy (TNC) recently unveiled plans to mobilize $1.6 billion of funding for global ocean conservation efforts through blue bonds under a scheme dubbed “blue bonds for conservation”. An innovative finance model using philanthropy to save the world’s oceans by providing upfront capital.
Blue bonds offer an opportunity for private sector capital to be mobilized to support the blue economy. Capital markets have a key role to play in environmental stewardship and more specifically, the protection of the oceans and coasts. Therefore, it is anticipated to move from policy statements into actual implementation collaborations between public and private sector including the local capital markets will be a necessity – how: a bank may use its balance sheet to issue a blue bond via the stock market to finance a specific blue economy project (e.g. sustainable fishery, marine transport, etc) then the proceeds from such a project will be ring-fenced for bonds repayments, or a SOEs or a government may include blue bonds in its bonds issuance program to specifically finance identified marine project – infrastructure constructions, fishing equipment, transport and list those bonds into the stock exchange, etc.
Enhancing our blue economy
Innovative blue financing tools such as blue bonds can provide the much-needed finance to help support Africa’s blue economy.
With a coastline of over 47,000km, the African continent has 38 coastal and island states. If we take the fisheries and aquaculture sector as an example, the sector employs more than 12.3 million people and was estimated to generate roughly $24 billion, according to the Food and Agriculture Organization. The sector is crucial in providing food security and nutrition to millions of Africans. Tanzania’s coastal line id over 1,400km with over 10 million of population whose lives benefits, in one way or the other, from the ocean.
Food security is a pressing issue in Africa. Rising temperatures coupled with ocean acidification is altering the aquatic ecosystems. This in turn not only threatens the sustainability of fisheries and food security, but employment also. Communities that heavily dependent on the fisheries sector for their livelihood are under threat, according to AfDB.
Proceeds raised from Seychelles’ inaugural blue bond went towards supporting “sustainable and fisheries projects”. Innovative ocean financing tools can be used to invest in sectors of the blue economy such as fisheries to enhance food security, protect livelihoods and help drive sustain ecosystems.
Sustainable ocean development
The ocean is one of the top drivers of our economy and has great potential for innovation and growth.
If we are to harness the ocean’s vast potential and preserve its biodiversity, a multi-stakeholder approach is required and international cooperation between governments, not-for-profit organizations, multilateral development banks and the local financial sector – including banks and capital markets to harness the potential of accessing sustainable financial resources.
We need to recognize the value of the blue economy and provided the political willingness shown by our leaders, we – in the private and public sector actors – need to attract investment, while putting sustainability and preservation at the center of these pursuance.