Climate change causes sea temperature increases, ocean acidification, and rising sea levels. These changes impact marine ecosystems, causing coral bleaching, habitat destruction, and altered migratory patterns. They also impact food production and supply chains.

Blue bonds are a subcategory of green bonds. They are intended to finance projects that contribute to the blue economy, conserve and restore the ocean, and exploit the potential of sustainable marine industries, such as fishing, aquaculture, and renewable energies.

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Despite being a relatively new field, blue bonds are attracting a growing number of investors interested in sustainability.

The blue economy refers to all economic activities that depend on the oceans and their resources. This includes fishing, aquaculture, coastal tourism, maritime transport, and marine renewable energy.

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The purpose is to generate income while promoting conservation and restoration efforts of the marine ecosystem. Sustainable activities are generated for vulnerable populations and SMEs.

Blue bonds finance projects in these areas that positively impact the oceans and their ecosystems.

Why invest in blue bonds? There are several reasons why blue bonds are a good investment:

• Transparency and traceability: Blue bonds offer investors greater transparency and traceability of their investments. The funds raised are allocated to specific projects contributing to the blue economy, allowing investors to know exactly how and where their money goes.

• Positive environmental impact: Blue bonds have a positive environmental impact by financing projects contributing to the blue economy. This includes protecting marine biodiversity, reducing carbon emissions, and promoting sustainable practices in the fishing and aquaculture industry.

• Access to new markets: Blue bonds open a new niche of financing. This allows companies to access specific resources available in the market, such as IDB Invest funds, to finance blue projects.

• Improvement of risk management practices: By requiring issuers to follow environmental guidelines, Blue Bonds promote implementing best practices in risk management.

• Offers good returns: About half of the world's population lives in areas close to or develops activities related to the oceans. This makes all activities associated with the blue economy attractive from the point of view of investment return.

Banco Bolivariano

Ecuador's banking sector has long been committed to sustainability. In 2016, the Association of Private Banks (Asobanca) launched the Sustainable Finance Protocol, a strategic initiative that has promoted commercial banks to manage a joint sustainable finance agenda.

Version 2.0 of this protocol added a new line of social development within sustainable finance strategies, reinforcing banks' work to address social inequalities such as the gender gap and financial exclusion.

Ecuador's focus on the blue economy, which involves carefully using and conserving marine resources, is crucial, especially for the country's prosperous fishing sector and shrimp exports.

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Banco Bolivariano, a commercial bank widely recognized for its commitment to corporate social responsibility, issued a blue bond for US$80 million for sustainable projects related to seafood products, water management, wastewater and solid waste, and circular economy initiatives.

With most funds destined for the aquaculture sector, the issue involved working with companies that comply with international certifications to ensure sustainable operations.

In addition, Banco Bolivariano receives advisory services from IDB Invest to improve its sustainability strategy and align it with the TNFD (Task Force on Nature-related Financial Disclosures).

A comprehensive analysis

In addition to the previous example, blue bonds can cover a much broader spectrum of activities.

For example, a new IDB Invest project in the region focuses on sustainable tourism, coastal real estate projects, drinking water systems, the water-related infrastructure sector, coasts, or productive activities connected to the oceans.

At IDB Invest, we work closely with issuers to determine the appropriate segmentation of blue projects.

For the definition of blue investment categories, we make an analysis of the relevance of the legal, political, and institutional framework of the country where the project is, in addition to the marine-coastal zone, the protection of the maritime-terrestrial zone, and the coastal urban zone.

The analysis also includes issues related to biodiversity, the environment, wildlife conservation, tourism development, housing, urban planning, water, drinking water, wastewater, and solid waste.

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