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as the climate change crisis has brought impacts to inland water and marine ecology, many countries have begun to think about how to promote the sustainable use of marine energy resources, ensure the green development of the marine economy, and strengthen water resource protection and management. in this context, green financial products represented by blue bonds are becoming innovative financing tools for marine project financing and water resource management.

since the beginning of this year, investors and issuers have shown increasing interest in blue bonds. in the domestic market, several innovative blue bonds have been issued, including foreign currency-denominated bonds issued overseas; in the international market, the international finance corporation, a subsidiary of the world bank, is taking the lead in establishing a fund "dedicated to investing in blue bonds" in an effort to contribute to the sustainable transformation of the marine economy.

in january 2020, the china banking and insurance regulatory commission issued the "guiding opinions of the china banking and insurance regulatory commission on promoting high-quality development of the banking and insurance industries", proposing to explore innovative green financial products such as blue bonds to support the development of green, low-carbon and circular economies.

as a sub-product of green finance, blue bonds provide investors seeking to diversify their portfolios with an opportunity to invest directly in green projects that seek to generate positive and measurable impacts.

since the beginning of this year, china has actively explored innovative blue bonds. in april, qingdao water group issued the first green medium-term note (scientific and technological innovation note/blue bond) in 2024, with an issuance scale of 260 million yuan and a term of 3 years. the funds raised will be used to support the development of the water group's seawater desalination business. this is the first "blue + scientific and technological innovation" innovative bond in the country. it is an innovative financial instrument that combines the blue development of the marine economy with scientific and technological innovation. it is a new model for solving the freshwater crisis in coastal areas and promoting the sustainable use of marine resources.

on july 9, china construction bank london branch issued a 2 billion yuan three-year blue fixed-rate bond, which was the first blue bond issued overseas by construction bank. on july 15, qingdao guoxin group issued a 150 million us dollar three-year overseas blue bond, which was the first blue overseas bond in shandong province and set the lowest record for the issuance of non-financial bonds with the same structure in china in the past year.

at the same time, the international market has also paid close attention to blue bonds. currently, the international finance corporation and the us asset management giant t. rowe price are working together to establish a new fund that specializes in investing in blue bonds in developing countries, with all proceeds going to the sustainable use of marine resources and the sustainable development of the marine economy. both parties have pledged to provide $75 million in seed money to the fund, and plan to raise another $350 million, which is expected to be officially launched before the end of the year.

william atwell, a long-term analyst at fitch, said that since the seychelles issued its first blue bond in 2018, raising $15 million, the total issuance of blue bonds worldwide has reached $6.8 billion by the end of last year. however, in comparison, the total issuance of green, social, sustainable and sustainable development-related bonds during this period reached $4.6 trillion. "blue bonds are just a drop in the ocean, and the market size needs to grow further," he stressed.

although the blue bond market is relatively small, controversy still exists. the industry calls for strengthening the cultivation of "blue" investment preferences and improving the profitability of "blue" projects to reduce the investment risks of blue bonds.

matt lawton, portfolio manager of t. rowe price's global impact credit strategy, said that gabon issued a $500 million blue bond last year, but only a small portion of the funds raised were used for marine protection and marine economy-related activities, which has been criticized. in addition, like any fixed-income investment, blue bonds also have investment risks, including credit risk and interest rate risk. in addition, emerging markets are not as mature as developed markets, but emerging markets and island countries are more vulnerable to climate change, resulting in a larger funding gap for blue economic activities related to protecting the ocean and using the ocean in a sustainable way to develop the economy and improve livelihoods. therefore, the risk of issuing blue bonds is relatively higher.

blue bonds can not only drive the growth of the green bond market and promote capital flows, but also address the funding gap in the marine economy. analyzing the cost of ocean degradation from an economic perspective, the united nations environment programme finance initiative estimates that ocean-related industries contribute $2.5 trillion in value to the global economy and support more than 30 million jobs. in addition, the ocean provides an important source of protein for 3 billion people, and its ecosystem is an important mitigator of climate change. as the largest carbon sink on earth, the ocean covers about 70% of the earth's surface, and its carbon storage capacity is nearly 20 times that of land and nearly 50 times that of the atmosphere.

however, as the climate crisis intensifies, water shortages, pollution and degradation, and marine ecosystem risks are becoming more prominent, exacerbating challenges in sustainable development of the marine economy and marine ecological protection. at the same time, pollution from oil spills, shipping, chemical and industrial waste, and agricultural runoff is degrading marine ecosystems. the world bank estimates that by 2030, $114 billion will be needed each year to achieve clean water goals.

the international capital market association pointed out that the ocean, as an important global carbon sink, absorbs 31% of the world's carbon dioxide each year, providing help for global climate stability.from 2018 to 2022, the global issuance of blue bonds reached us$5 billion, which not only provided funds for the sustainable blue economy, but also provided investors with the opportunity to allocate blue sustainable assets.

last september, the international capital market association released its first blue bond guide, viewing it as a subset of the larger green bond market rather than an independent new asset class. the guide clearly divides blue bond categories and eligible financing projects based on green bond principles, including climate adaptation and resilience in coastal areas, marine ecosystem management, protection and restoration of sustainable coastal and marine tourism, sustainable marine value chains, marine renewable energy, sustainable ports, sustainable maritime transportation, etc.

thongai kunoruwi, head of fixed income esg at t. rowe price group, emphasized that blue bonds are an application tool of green finance in the ocean field, aimed at promoting marine protection and sustainable development of the marine economy. in order to ensure that they can be used for their intended purposes, it is necessary to clarify their issuance conditions and usage details, and at the same time closely track the use of funds to prevent "greenwashing" and "cheating".