Author: Maram Ahmed, Fellow, School of Oriental and African Studies (SOAS), University of London
Seventy-one percent of the Earth’s surface is ocean, and billions of people depend on the oceans for their livelihoods. Maritime transport remains an essential part of international trade as over 90% is carried by the seas, according to the United Nation’s (UN) International Maritime Organization.
The renewed attention on the ocean in recent years is reflected in the UN Sustainable Development Goals, as goal number 14 aims to “conserve and sustainably use the ocean, seas and marine resources for sustainable development”.
The blue economy is of growing importance and gaining momentum amongst policymakers across the world. This is not surprising as the ocean is a significant wealth generator estimated at an annual value of $1.5 trillion per year, making it the world’s seventh largest economy.
However, the effects of climate change, human activities and other burdens can be felt by the seas, as we have lost nearly half of the world’s coral reefs. Coral reefs are extremely important to the biodiversity of the oceans as they support a quarter of all marine species and hundreds of millions of people rely on them for their livelihoods, nutrition and socioeconomic well-being.
Given its immense size, how can we unlock the potential of the ocean economy while also protecting its marine environment?
Innovative ocean financing
Innovative financial solutions will be required to enhance ocean and coastal resilience.
Blue finance, in particular blue bonds, have huge potential to help surmount these challenges. Blue bonds are an innovative ocean financing instrument whereby funds raised are earmarked exclusively for projects deemed ocean-friendly.
The Republic of Seychelles last year, launched the world’s first sovereign blue bond raising a total of $15 million to advance the small island state’s blue economy. The World Bank helped design the bond and vice president and treasurer Arunma Oteh said the blue bond was “yet another example of the powerful role of capital markets in connecting investors to projects that support better stewardship of the planet”.
Since then, Nordic Investment Bank, the international financial institution of the Nordic and Baltic countries, launched a “Nordic-Baltic Blue Bond” in January raising SEK2 billion for projects such as wastewater treatment, prevention of water pollution and water-related climate change adaptation.
Last April, Morgan Stanley, working with the World Bank sold $10 million worth of blue bonds with of the aim solving the challenge of plastic waste pollution in oceans.
The international not-for-profit group The Nature Conservancy (TNC) recently unveiled plans to mobilize $1.6 billion of funding for global ocean conservation efforts through blue bonds under a scheme dubbed “blue bonds for conservation”. An innovative finance model using philanthropy to save the world’s oceans by providing upfront capital.
Blue bonds offer an opportunity for private sector capital to be mobilized to support the blue economy. Capital markets have a key role to play in environmental stewardship and more specifically, the protection of the oceans and coasts.
Enhancing Africa’s blue economy
Innovative blue financing tools such as blue bonds can provide the much-needed finance to help support Africa’s blue economy.
With a coastline of over 47,000km, the African continent has 38 coastal and island states. If we take the fisheries and aquaculture sector as an example, the sector employs more than 12.3 million people and was estimated to generate roughly $24 billion, according to the Food and Agriculture Organization. The sector is crucial in providing food security and nutrition to millions of Africans.
Food security is a pressing issue in Africa. Rising temperatures coupled with ocean acidification is altering the aquatic ecosystems. This in turn not only threatens the sustainability of fisheries and food security, but employment also. Communities that heavily dependent on the fisheries sector for their livelihood are under threat.
Proceeds raised from Seychelles’ inaugural blue bond went towards supporting “sustainable and fisheries projects”. Innovative ocean financing tools can be used to invest in sectors of the blue economy such as fisheries to enhance food security, protect livelihoods and help drive sustain ecosystems.
Sustainable ocean development
It is hoped that the success of green bonds in leveraging capital markets to tackle environmental issues will create a blueprint for the emergent blue bond market. As with any nascent market, this may take some time.
The ocean is a top driver of the African economy and has great potential for innovation and growth.
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If we are to harness the ocean’s vast potential and preserve its biodiversity, a multistakeholder approach is required and international cooperation between governments, not-for-profit organizations, multilateral development banks and the financial sector.
More African governments need to recognize the value of the blue economy and provided the political will needed to attract investment, while putting sustainability and preservation at its center.