University of Edinburgh law student Tara Tell explores the rise of blue bonds, their impact on the sustainable bond market and their potential to drive marine conservation efforts worldwide
Over the last decade, the issuance of sustainable debt has shot up. This influx of eco capital has been driven by an increase in investor focus on environmental, social, and governance (ESG) issues. Blue bonds have emerged as a promising financial solution to address the significant funding gaps remaining in achieving the UN Sustainable Development Goals, particularly SDG 6 (Clean Water and Sanitation), and SDG 14 (Life Below Water).
If you are familiar with Green Bonds which set out to fund green projects, Blue Bonds are effectively their marine counterpart. Blue bonds are debt instruments geared towards financing ocean-friendly and clean water projects. Blue bonds follow the established sustainable finance guidelines, such as the International Capital Market Association (ICMA) Green and Sustainability-Linked Bond Principles, and the EU Taxonomy for sustainable finance, which are aimed at ensuring the funds are used for suitable eco-friendly purposes.
The Seychelles’ issuance of the first-ever sovereign blue bond in 2018 demonstrated the success of this initiative. $15 million was raised for marine conservation and related projects.
The future of blue finance
Blue bonds, as they gain momentum, have the propensity to shape the sustainable bond market by driving regulatory and market innovation. For instance, regulatory initiatives like the EU Taxonomy for Sustainable Activities now encompass maritime transportation and port operations.
Blue bonds offer a novel opportunity to grow the sustainable bond market by diversifying investment options and raking in capital for marine conservation and water management — expanding the market beyond traditional green bonds. This initiative has the potential to bridge the earlier described funding gap to meet SDGs 6 and 14. Blue bonds are increasingly gaining traction, as institutional investors seek to align their investment portfolios with their ESG goals while generating financial returns.
Following from this, blue bonds have the potential to attract new investors to the sustainable bond market. Previously disengaged institutional investors in sectors such as aquaculture and fisheries, offshore renewables, shipping value chains, ports, and ocean-based ecotourism may take an interest in blue finance where their industries are concerned.
Issuance of blue bonds is likely to drive collaboration across the public and private sectors. For instance, bolstering initiatives like debt-for-nature swaps, which come about when a country refinances its external debt at a low interest rate, agreeing to use the alleviated debt to fund environmental improvements. In the blue bond context, this improvement would focus on maritime conservation or water sanitation. Such collaborations have the dual benefit of relieving developing nations of their financial burdens while benefiting marine ecosystems and communities lacking access to clean water.
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Find out moreBlue bonds promote sector-specific innovation. Various industries are increasingly incorporating blue finance into their sustainability strategies. For instance, the maritime industry is under pressure to decarbonise, with the International Maritime Organization (IMO) pronouncing its ambitions of cutting greenhouse gas emissions by a minimum of 70% by 2040. Blue bonds are going to be key in financing low-emission vessels, facilitating port electrification, and rolling out clean fuel alternatives.
A standout example of this in 2025 is DP World Limited’s issuance of $100 million in blue notes to fund sustainable maritime transport and marine ecosystem conservation. This issuance marked the first blue bond issuance in the Middle East and North Africa region – highlighting the growing prevalence of this form of sustainable finance. This also demonstrates how blue finance can facilitate the integration of sustainable practices into large-scale port and logistics companies while maintaining operational efficiency. By investing in green shipping infrastructure and reducing the environmental impact of global trade, blue bonds are driving sector-wide transformation.
Blue finance is also encouraging innovation in the sustainable bond market by extending beyond traditional bond structures, to include financial products like blue loans and blue credit. An instance of blue credit being extended is in 2022 when Proparco granted its first $150-million blue credit line to Bank of Qingdao, China – a credit line set to underwrite over 50 blue finance initiatives by 2025. Backed by the International Finance Corporation (IFC), Asian Development Bank (ADB), and Germany’s DEG, it will assist with mitigating marine pollution, support wastewater treatment facilities, and create incentives for sustainable fishing in Shandong, a province on the Chinese seaboard where coastline damage has long been a sore point.
In terms of blue loans, a prime example is the Asian Infrastructure Investment Bank’s (AIIB) $100 million blue loan to JC International Finance & Leasing Co. of China (JC Leasing). AIIB’s first blue financing project was geared towards ocean and coastal protection, improving water sanitation, and expanding access to clean water.
That said, blue finance has already made strides in reshaping the sustainable bond market to an extent by prompting such innovation.
Concluding thoughts
Blue bonds have real potential to drive the blue economy through increasing investment in marine conservation and access to clean water. With their ability to attract institutional investors, foster sector-specific innovation, and encourage public-private partnerships, blue bonds are poised to become a key tool in addressing global sustainability challenges.
However, for blue finance to reach its full potential, financial institutions, regulators, and governments must play their parts. Existing frameworks, such as the ICMA Blue Bond Guidance, IFC Blue Finance Guidelines, and UN Sustainable Blue Economy Principles, provide a solid foundation, but further efforts are needed to harmonise regulations across jurisdictions and ensure consistent impact reporting. Preventing “bluewashing” will also be paramount in maintaining investor confidence and ensuring that blue bonds generate real environmental benefits. Strengthening transparency measures and enforcing strict eligibility criteria for blue bond-funded projects will be essential in this regard.
Looking ahead, continued collaboration between the financial and legal sectors will play a crucial role in refining blue bond frameworks. If implemented effectively, blue bonds have the potential to be a game-changing financial instrument, not only accelerating progress toward SDG 6 and SDG 14 but also transforming the broader sustainable bond landscape.
Tara Tell is a penultimate-year law student pursuing a four-year LLB at the University of Edinburgh, aspiring to a career in Commercial Law.
The Legal Cheek Journal is sponsored by LPC Law.