Protecting marine biodiversity is one of the primary concerns on the agenda for the United Nations Biodiversity Conference (COP 15), which takes place in Montreal from December 7 to December 19. Proparco recently completed its first blue finance transaction, which was focused on the preservation of marine habitat.

The goal of COP 15 is to make a new plan for protecting and restoring nature around the world. An important part of the process is protecting the oceans, which cover more than two-thirds of the Earth's surface and absorb about one-third of the CO2 emitted. Blue financing is becoming increasingly popular as a means of assisting in the protection of marine ecosystems by bringing together private sector stakeholders with solid commitments and public investment.

What is Blue Finance?

In line with the 14th sustainable development goal (SDG), which is to promote the conservation and sustainable use of the oceans, seas, and marine resources for sustainable development, Blue Finance looks at the specific issues involved in protecting the maritime and coastal environment and marine biodiversity. In 2018, the European Commission, UNEP-FI, WWF, the World Resources Institute (WRI), and the European Investment Bank (EIB) laid out its main principles.

In 2022, Proparco gave the Bank of Qingdao in China its first blue line of credit. Since it is in a coastal province and has a lot of experience with green finance (Green Bonds), the Bank of Qingdao is focusing on blue finance to grow its sustainable finance business.

This $150 million blue financing project is being led by the International Finance Corporation (IFC), the Asian Development Bank (ADB), and Germany's private sector development finance arm (DEG). This will allow the China-based bank to start more than 50 blue finance projects by 2025.

Raphaël de Guerre, Proparco Regional Director for North and South-East Asia, who has worked on this project out in the field, says that “the project is aiming to have a strong positive impact on sustainable development in the coastal areas of China's Shandong province, which have suffered greatly from marine pollution and the consequences of climate change.” Some of the goals are to reduce the amount of untreated marine waste and wastewater, cut down on plastic pollution, protect water supplies, and improve fishing methods.

"Blue Loans and Blue Bonds are new ways to finance projects that protect our oceans and water resources," says Eduardo Dias Aguilar, Senior Investment Officer at Proparco. "All the money we raise goes to projects that protect our oceans and water resources." However, blue finance is comprehensive in its scope, covering all economic activities related to oceans, seas, and their coasts, including decarbonising transport, offshore renewables, pollution reduction, restoring marine ecosystems, sustainable blue biotechnologies, water treatment, sustainable fishing, and eco-tourism.

Paul de Montmorillon, Senior Investment Officer with Proparco, believes that “another innovative aspect of the Bank of Qingdao project is the deployment of a brand new tool—a Blue Bond Framework—that clearly specifies eligibility criteria for fundable projects.” The Framework, which lists 27 activities divided into 7 sub-categories, is the result of a lot of technical help that the IFC gave to the Bank of Qingdao. It should be used as an important benchmark for future blue finance operations.

The Bank of Qingdao project is the first blue financing operation funded by the Agence française de développement’s (AFD) group and its private sector financing arm Proparco. It complies with United Nations Environment Programme (UNEP) blue economy financing principles which the Group signed in early 2022. Paul de Montmorillon adds that “protecting marine biodiversity is a key focus of AFD Group. Proparco is currently looking at a second project to provide blue financing in Latin America.”

Blue finance is set to grow rapidly given the urgency of the related environmental, social, and economic issues. Eduardo Dias Aguilar feels that “we can be proud of what we have achieved on this first blue finance operation. This will probably encourage other investors to commit to this type of financing".

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Source: Proparco