Nuveen Q&A: There is lack of understanding over the potential of … – ESG Clarity

Conserving and using the oceans, seas and marine resources in a sustainable way is one of the aims of the United Nations Sustainable Development Goals, adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet and ensure peace and prosperity by 2030.

More than three billion people depend on marine and coastal biodiversity for their livelihoods, and globally the market value of marine and coastal resources and industries is estimated at $3trn per year. Therefore, investment in the conservation of our marine environment is seen as the next frontier in the responsible investment market in the form of blue bonds.

See also: High Seas Treaty will boost interest, access and issuance of blue bonds

According to the UN Global Compact, blue bonds today are where green bonds were 10 years ago. The green bond market has seen rapid growth,with more than $1trn in total issuance, and blue bonds are poised to see a similarly strong market.

ESG Clarity spoke to Stephen Liberatore, head of ESG and impact, global fixed income, at Nuveen, to find out more about this emerging investment space.

Can you explain why investment in ocean conservation is so important?

The ocean covers more than 70% of the surface of our planet and is home to some of the most diverse, unexplored and unique habitats. However, due to increased ocean pollution from fishing, discarded plastic, oil spills and more, marine eco-systems are more vulnerable than ever before.

Blue bonds, a subset of green bonds, are relatively new to the market and provide investors with an instrument designed to support sustainable marine and fisheries projects, preserve local tourism and encourage sustainable ocean management practices. It is crucial we combine both public and private investment to mobilise resources to empower local communities and protect our oceans.

What kind of funds are investing in blue bonds?

Any institutionalinvestor can become involved in blue bonds, working alongside governments, conservation groups and other stakeholders to develop projects. For instance at Nuveen, we worked alongside The World Bank back in 2018 to launch the worlds first blue bond in the Seychelles, where we were the lead investor.

More recently in March this year, we acted as the anchor investor buying 80% (roughly $58m) of a rare blue bond designed to help finance debt relief for Barbados and protect its marine environment. The bond aimed to preserve local tourism and the fishery industries, the latter of which contributes to 40% of Barbadoss GDP, through sustainable ocean management practices in the Caribbean nation. It was the first time Nuveen allocated capital to a bond that is tied to a so-called debt-for-nature swap.

How do you measure the impact that blue bonds have?

For the Barbados Blue Bond, Nuveen uses impact data provided to the Marine Spatial Plan Steering Committee a body consisting of The Nature Conservancy, government officials and local stakeholders to monitor the progress of capital allocation and conservation targets.

What should be done to further incentivise investment in blue bonds?

In order to further incentivise investment in blue bonds, we need to continue raising awareness of their numerous benefits.

Blue bonds support local communities across the planet with a range of opportunities, including coral reef restoration, reducing the negative impact of fishing, for example moving away from nets to long lines, and increasing clean water resources.

One example to demonstrate their benefits is the recent Ecuador blue bond, which targeted the protection of marine resources in the Galapagos archipelago. The Galapagos are considered one of the most ecological diverse areas on the Earth and is designated a UNESCO World Heritage Site.One of the main environmental commitments of the transaction is the development of a 60,000 kilometre marine reserve including a 30,000 kilometre no-take zone where the protected hatcheries will support adjacent fishing grounds.

What hurdles are blocking the development of the blue bonds market?

Blue bonds are an emerging area of climate finance, so amongst certain investors there is a lack of understanding over their purpose and potential. Blue bonds are a fantastic innovation to enhance ocean and coastal preservation while providing economic benefit to the issuers and their citizens. Therefore, the need for education is more important than ever to ensure blue bonds continue to be supported and launched.

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Nuveen Q&A: There is lack of understanding over the potential of ... - ESG Clarity