Asia Wakes Up to Blue Finance Regulation

Regulation Asia examines how blue finance frameworks are starting to make ripples across the region.

The Philippine Securities and Exchange Commission (SEC) in September 2023 became the first regulator to issue blue finance guidelines 

In developing its own guidelines, the Philippine SEC leaned heavily on Asean’s existing green bond frameworks, illustrating infancy of this market and the still-fluid nature of regulatory developments.   

Financing gaps  

The climate case for investing more in protecting ocean and coastal ecosystems is inarguable; ocean-based climate solutions could reduce the global greenhouse gas emissions gap by up to 35% on a 1.5°C pathway which is essential to sustaining human livelihoods in coastal communities, according to the High-Level Panel for a Sustainable Ocean Economy, a global initiative joining world leaders. 

The financial case is also compelling; investing US$2-4 trillion in sustainable ocean activities may lead to US$8-23 trillion in net economic benefits.  

Swiss impact investing specialist Tameo identifies a blue financing gap of US$5.5 trillion in Asia-Pacific alone; regulatory uncertainty around a concept barely a decade old and the difficulty of valuing a communal fluid asset has opened a trench in financing between sustainable green bonds and their blue peers.  

The cumulative value of green bonds issued reached US$2.2 trillion between 2006 and 2022, while blue bonds notched US$5 billion between 2018 and 2022.   

“To date, the majority of blue bonds issued have been in accordance with the ICMA’s green bond principles,” says Katharine Thoday, the Asian Development Bank (ADB)’s principal environment specialist.   

However, the green bond principles are designed around projects aiming to address the loss of biodiversity on land, enhance energy efficiency, reduce carbon emissions and pollution and improve livelihoods and jobs.  

Although these green bond principles exclude specific sea-related activities like offshore oil and gas, dredging and deep-sea mining, the consensus is that they lacked a general clarity on sustainable blue investments that contribute to sustainable development goal (SDG) 14; this refers to life below water and more specifically refers to the goal to conserve and sustainably use the oceans, seas and marine resources for sustainable development.  

Hence the need for a specific set of regulations addressing blue finance.  

What is blue?  

The Philippine SEC’s guidelines are based on the Blue Finance Guidance Framework developed by the International Finance Corporation (IFC) and the Green and Blue Bond Framework of the ADB.  

The SEC’s guidelines also align with theInternational Capital Markets Association (ICMA)’s guidelines for listing eligible blue activities that were drafted independently and issued around the same time.  

Torsten Thiele, blue finance senior advisor at Ocean Risk and Resilience Action Alliance (ORRAA), says, “Initial efforts of both the IFC to identify what is blue and the ADB to do some real transactions are now under the ICMA umbrella, more recognized by traditional capital market participants, and this is really a step forward.”  

According to Thiele, sectors such as sustainable ports and clean marine transport identified under the ICMA guidance are ‘grown up’ and largely de-risked, so should not have too many problems attracting finance. The Export-Import Bank of Korea’s January 2023 US$1 billion issuance in 10-year notes supporting projects related to sustainable marine transport was a case in point.  

When it comes to offshore renewables projects such as fixed and floating wind and floating solar sources, these should also lend themselves to scalable transactions suitable for blue bond financing although this potential is yet to be proven.  

“What we have noticed is that the regulatory guys are not quite up to the task [when it comes to facilitating projects in the first place],” says Thiele, adding that countries like Brazil do not have the long-term contractual set-ups required for large-scale infrastructure, while even in countries that do, like the US and UK, offshore wind auctions have failed recently due to poor design.  

Blue versus green  

In June, Orsted became the first energy company to issue ‘blue bonds’ comprising €100 million (US$107.2 million) in five-year notes issued in a private placement arranged by NatWest Markets and subscribed to by investors including Dutch pension investment company APG (on behalf of ABP).  

When it comes to issuing bonds to fund offshore projects that meet both sets of criteria, there arises a question: green or blue?  

Kathrine Elskov, Orsted’s senior media advisor, says the blue bond served a specific purpose, which was to test a biodiversity impact measurement framework. “Green bonds will continue to be our main funding source for bonds because it relates directly to our investments in renewable energy projects, whereas the biodiversity investments are relatively small and the scope for blue financing naturally more limited,” Elskov adds.   

Orsted has financed offshore wind projects to the tune of billions of dollars through traditional green bonds, and Elskov’s comments suggest that it is unlikely that the ICMA guidance would prompt the Danish energy giant to switch classifications.  

Seen more positively, there are three reasons why issuers might avail themselves of the ICMA’s latest blue finance guidance. Firstly, there is the push factor related to ocean-based impact investment and corporate social responsibility; secondly, a pull factor of higher returns; and thirdly, the fact that a project lies in an area of coverage not previously listed under green bond classifications.   

Building consensus  

What is needed is a consensus on what constitutes ‘blue’; ICMA’s green bond principles offer an idea of the kind of terminology that is needed, and a useful lesson on how proceeds can be ring-fenced and applied to projects that promote environmentally sustainable causes.  

ICMA’s green bond principles were not designed to offer hard-and-fast definitions of what green bonds are. Instead, they provide recommendations for issuers to state clearly their use of proceeds. In doing so, they provide transparency and greater disclosure to investors, who should be better equipped to make decisions about a bond’s environmental or social impact.  

However, that fact that blue bonds are sliding into a space where they are defined as ‘use of proceed’ debt would mean they require complicated measurement and verification frameworks, rather than simply an agreement to yield a future financial return.  

For this reason, Nicole Lim, ESG investment analyst of Asia fixed income at abrdn, says the market has yet to see large volumes of blue bonds from Asian corporates due to the lack of consensus on the types of relevant ‘blue’ projects.  

“Any labelled bond should minimally be aligned to internationally-recognised principles, and blue bonds should be directed specifically to projects that contribute meaningfully to positive water, marine or coastal outcomes,” Lim says.  

ORRAA’s Thiele adds, “Blue bonds should be a way of accessing capital market financing that is cheaper than lending bespoke, but what you have in the real world is a lot of so-called blue bonds that are very bespoke, very structured, and therefore have the same cost as if they were not a blue bond.”  


A recent controversy over so-called blue bonds arranged by Credit Suisse and the Bank of America under the auspices of US non-profit The Nature Conservancy in connection with emerging market debt swaps hints at the possibility of ‘bluewashing’.  

The bonds were linked to the refinancing of over US$1 billion in debt for Belize, Barbados and Gabon arranged several years ago. The issuers had pledged to invest a portion of proceeds in marine conservation efforts in return for leeway to refinance their sovereign debt.  

ICMA cautioned that the bonds only allocated a small portion of proceeds to marine conservation, and the issuers did not guarantee that they would monitor the carrying out of specified activities by the issues. Hence, ICMA said the bonds did not qualify under its new blue finance guidance. Nor did the arrangers guarantee that they would monitor whether the issuers properly carried out the specified activities.    

“As blue bonds and blue finance gain popularity they will face ongoing scrutiny, but we shouldn’t throw out good ideas because they differ from existing bond frameworks,” says independent environment consultant Nate Maynard.   

“Ocean finance differs substantially from green finance; the terminology needs to expand to allow for a variety of blue bonds and finance. Countries like Belize and Barbados are creating marine-protected areas and we need the flexibility to support them through a variety of funding options,” Maynard adds.  

Asian leadership   

In a report lauded for providing much-needed consolidated analysis of the blue finance space, Tameo tracks global blue debt issuance to date at US$9.7 billion across 51 issues, of which more than half originated in Asia.  

ADB’s Thoday says ADB will support the development of Asean sustainable finance guidance that align with global standards as this plays an important harmonising function for member states, recognising different Asean economies, financial systems and transition paths.  

“In addition to developing standards we need to support sustainable blue finance literacy and build confidence by building blended transactions, and showing proof of concept,” Thoday adds.  

ADB is at the forefront of a September agreement among public development bank efforts to develop a blue finance roadmap which should help proliferate blended finance structures. For example, ADB has committed to providing China’s Qingdao Bank with US$70 million for marine environment protection and sustainable blue economies in China that would lead the way for the issuance of the first blue bond by a Chinese commercial bank.   


The current debate around blue finance would benefit from being reframed by shifting the focus on carbon emission mitigation to nature and society-positive outcomes, ORRAA’s Thiele says.   

He adds, “If I grow seaweed, it’s because it’s a great food source. But seaweed farmers currently don’t grow enough seaweed due to a lack of upfront funding, insurance and value chains,” he says.   

“Adding climate mitigation or a carbon consideration into that financial equation may get growers over the line,” Thiele says.  

Carbon markets are a potential financing avenue for such projects, but they remain niche despite the success of initiatives such as the mangrove restoration project in Sindh, Pakistan.   

Mangrove forests sequester up to four times as much carbon as terrestrial forests, and Sindh’s Delta Blue Carbon project in August entered a second phase, aiming to complete mangrove restoration and plantation on 450,000 hectares in the Indus Delta by 2030 and raising a combined US$12 billion in certified emission reductions upon completion in 2075.   

The ORRAA is intent on uniting direct public sector funds with development finance, private investors and, crucially, insurance players to pioneer public-private partnership approaches to ocean finance.   

“Something like 80% of the world’s coasts don’t have basic insurance products, so insurance has a huge role to play in de-risking what are in some places straightforward solutions,” Thiele says. 

Aligned with ORRAA’s approach, ADB is developing and piloting a public-private partnership for coral reef financing and insurance in Fiji, Solomon Islands, Philippines, and Indonesia.   

The project ‘Building-Coastal Resilience through Nature-Based and Integrated Solutions’ will provide the capacity for climate risk modeling for project sites to inform climate finance decision-making, as well as establish a fund for the maintenance and restoration of coral reefs including a novel parametric insurance.   

ORRAA itself is partnering with the Swiss Re Foundation, the US State Department and the UK’s Blue Planet Fund to execute small-scale exemplar projects that illustrate the potential of ocean economy solutions to generate sustainable returns that do not require a monitoring framework.   

“With climate change and rising water temperatures, current seaweed farms are failing,” says Patrik Huber, founder of Sayari Ventures, a beneficiary of ORRAA support in Kenya.   

“We need to push the farms deeper into the temperate water, and that costs money. Boats, anchors, anything that the local communities don’t have. It becomes a finance gap that needs to be solved,” Huber adds.   

Blue horizons   

The evolution of ‘blue’ regulatory frameworks will have to keep up with several initiatives have recently been signed or are in the process of being fleshed out that should unlock a new wave of public sector money for blue finance.   

These include the UN High Seas Treaty agreed in March 2023 which established a legal framework for the creation of marine-protected areas in international waters; and the 2030 Global Biodiversity Framework, which targets the protection of at least 30% of the world’s land and ocean by 2030.   

Separately, 18 countries are working on sustainable ocean plans that aim to guide the public and private sectors to finance and sustainably manage national ocean areas.  

These initiatives should give impetus to greater participation in the ocean economy and get regulators to start thinking more carefully about the deep blue sea. 

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