Deep clean: How ‘blue finance’ can save our oceans

The world’s oceans are under siege. Wide ranging projects and
innovative financing are needed to clean up the seas before it is
too late. Photo: Francesco Ricciardi

By Ingrid van Wees
Jan 14 2020 (IPS-Partners)

Cleaning the world’s oceans and keeping them clean is a
gargantuan task that will involve far-reaching projects backed by
innovative forms of financing

The world’s oceans are running out of breath. In the past 50
years, we have lost nearly half our coral reefs and mangrove
forests and the size of marine populations has halved. A third of
global fish stocks are already depleted.

If trends continue, it is estimated that there will be no stocks
left for commercial fishing by 2048 in the Asia-Pacific region
alone. By 2052 oceans might contain more plastic than fish by
weight and 90% of coral reefs may be lost.

The “blue economy”, which includes livelihoods and other
economic benefits derived from oceans, is estimated at between $3
trillion to $6 trillion per year globally. Oceans contribute
significantly to the gross domestic product of many developing
countries—as much as 13% in Indonesia and 19% in Viet Nam.

Thirty-four million people in our region are engaged in
commercial fishing. In Southeast Asia alone, the export value of
the fish caught was $19.5 billion in 2015. But the cost of
overfishing far exceeds this amount. Overfishing reduced the
aggregate net benefit of global fisheries by $83 billion in 2012,
with two-thirds of this loss occurring in Asia.

A ‘source to sea’ rescue plan

Saving our blighted oceans is a key development challenge, with
the future viability of so many economies and livelihoods at stake.
Clearly, the declining health of the world’s oceans is an issue
that does not just affect a single industry, country or sector. It
is a threat to the entire planet and all of its residents. The
solution, therefore, must be broad and far-reaching as well.

This involves strategies that cut across multiple sectors and
countries of the region in a holistic, “source to sea”
approach. Governments, NGOs, businesses and other stakeholders all
need to do their part. This includes reducing marine pollution at
the source while protecting and restoring coastal and marine
ecosystems and rivers.

Alternative livelihood and business opportunities need to be
created. Port and coastal infrastructure is overdue for
modernization. There’s an urgent need for ocean-friendly
infrastructure including integrated solid waste management,
ecologically-sensitive port facilities, and municipal and
industrial wastewater and effluent treatment. Equally crucial are
sustainable agribusinesses that reduce runoff of fertilizers,
agrochemicals, waste, and soil erosion, as well as a sustainable
aquaculture sector.

Attracting the scale of finance needed

The key challenge to implementing these far-reaching solutions
is financing. Large-scale investments are required to support these
projects and the private sector is the only source with the vast
financial resources needed. However, attracting private investors
can be tricky for ocean health-related projects.

The private sector needs a return on its investment which is
usually achieved through charges to a ‘user’ base, either a
beneficiary or a polluter. As with other global public goods
however, it’s often impossible to ascribe direct charges for a
project (such as those addressing coastal erosion) given the lack
of an identified ‘user’ base. Moreover, when user charges can
be applied, their level is constrained by affordability
considerations, such as in municipal wastewater projects. This
results in a volatile or at least uncertain revenue model,
compromising bankability and constraining the flows of private

“Blue funds” have huge potential to help overcome these
challenges. Arranged by governments or development finance
institutions, they could provide much-needed credit enhancement to
projects in the form of ‘blue credits’. These credits are
similar to carbon credits as they provide revenue support based on
the value of the avoided costs from doing a high impact project.
Such funds could also support issuance by underlying project
sponsors of more creditworthy blue bonds to raise competitive
long-term capital from the markets.

Multilateral development banks can help by developing blue
project selection criteria and policy frameworks, creating
financial instruments and products, blue funds or similar financial
mechanisms, mobilizing concessional finance, and preparing bankable
project pipelines.

Green financing has already beaten a path for blue financing to
follow. Green instruments aim to pool projects together to
diversify risks and enable wider access to financing by tapping the
capital markets through green equities and bonds. By enhancing the
bankability of a project, these instruments can encourage a scaling
up of investments in renewable energy, reforestation, watershed
management, air quality, and clean transport.

Blue finance investments can make the difference

ADB has issued $2.2 billion of Green
Bonds since 2010. With additional support, blue investments can be
similarly successful. Given the urgency and scale of the problem,
these investments need to gain traction rapidly. They are not yet
well understood and currently perceived as slow and risky, so it
may take decades to realize, verify, and capitalize on conservation

But there is hope that it won’t take long. Blue funds offer an
avenue to work with governments to improve the risk-return profiles
of projects and structure pooled investment products that can
unlock private capital. For blue finance to become mainstream,
governments and the general public need to be convinced of the
urgency of financing projects that support ocean health.
Development partners like ADB can help quantify the real costs and
benefits of blue investments for both governments and the private
sector. As these benefits are better understood, we expect more
willingness to finance the related costs.

The local knowledge of development organizations, as well as
their strong relationships with national and municipal governments
and other development partners, will be critical to ensuring that
the right blue investments are made in the region. This is why ADB
has launched a new
Action Plan for Healthy Oceans and Sustainable Blue

Deep-cleaning our oceans is a massive undertaking, and the price
tag will be similarly large. Blue finance offers a way to share the
funding of these initiatives. However, we must act now, while there
is still time.

This story was
originally published
by ADB-Asian Development Blog

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Deep clean: How ‘blue finance’ can save our oceans
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Source: FS – All – Ecology – News
Deep clean: How ‘blue finance’ can save our oceans