As blue bonds gain recognition as a promising financing instrument for the Blue Economy, they offer a way to mobilise capital for marine conservation, sustainable fisheries, coastal resilience and other ocean-related initiatives. In this article, Alice Dellavalle explores how these financial instruments can help bridge the ocean finance gap, why their uptake remains limited despite their potential, and what structural conditions will be essential to maximise their role in scaling up sustainable investment, with a view to healthier and more resilient oceans.
The ocean sustains the livelihoods of more than 3 billion people, including sectors ranging from fisheries to maritime trade, and absorbs around 25 to 30% of carbon emissions caused by human activity. Nevertheless, when it comes to funding, it remains one of the most neglected areas of sustainable development. SDG 14, Life Below Water, received just US$2.3 billion in 2019, which corresponds to only 0.6% of the funding earmarked for the SDGs, making it the least-funded goal.
In this context, blue bonds are one of the instruments that can help bridge the ocean’s funding gap, which is set to reach at least $1 trillion by 2030.
Blue bonds are fixed-income debt instruments designed to raise capital for ocean- and water-related projects. In practice, they enable governments, development banks, financial institutions and companies to raise funds for initiatives such as marine conservation, sustainable fisheries, coastal resilience, cleaner shipping, coral reef restoration and the reduction of marine pollution. They form part of the wider range of blue finance instruments, but stand out for their ability to channel capital on a large scale through a financial structure that is already familiar to investors.
The market is still developing, but it is growing rapidly. The first sovereign blue bond was issued by the Republic of Seychelles in 2018, raising $15 million to support marine conservation and sustainable fisheries. Indonesia later followed suit with a sovereign blue bond that raised US$150 million in 2023 for coastal restoration projects. Although they are gaining traction, blue bonds still lag far behind more established sustainable finance instruments, such as green bonds.
Among the various structural barriers limiting the wider adoption of blue bonds are high transaction and preparation costs, the lack of standardised impact metrics, fragmented governance frameworks, low investor confidence and limited institutional capacity, particularly in developing countries and Small Island Developing States. In many cases, ocean-related projects also struggle to demonstrate clear revenue streams, particularly when they focus on ecosystem restoration, biodiversity protection or pollution reduction, which makes these bonds more difficult to structure and scale up.
The system needs better underlying conditions and, in particular, there are five key points that will be crucial.
Firstly, the market needs clearer and more standardised frameworks to improve comparability and reduce the risk of bluewashing.
Secondly, issuers need more robust reporting systems, science-based indicators and independent verification of environmental and social impact.
Thirdly, it is necessary to raise investor awareness, as confidence in the market remains low and the track record is still limited.
Fourthly, public policies and multilateral support are crucial: guarantees, credit enhancement mechanisms and alignment with national blue economy strategies can significantly reduce risk.
Fifthly, project pipelines must become more robust and scalable, including through aggregation mechanisms that reduce issuance costs.
The Seychelles’ blue bond remains the strongest example of what blue bonds can achieve when these conditions are met. It has contributed to the protection of over 410,000 km² as Marine Protected Areas, supported five fisheries management plans, helped to strengthen governance in the sector, and generated measurable financial benefits across the value chain. It demonstrates that, when backed by robust institutions, transparent governance and credible impact monitoring systems, blue bonds can deliver real environmental and socio-economic outcomes.
In conclusion, blue bonds cannot be treated as a one-size-fits-all solution. In some cases, other instruments, such as blended finance or debt-for-nature swaps, may be more appropriate. However, as part of a broader blue finance strategy, they can play a critical role. The challenge now is to establish the frameworks, capabilities and trust needed for them to work at scale.
*This article is based, in part, on the conclusions set out in the article Financing ocean sustainability: lessons and limitations of blue bonds, published in the journal Lusíada. International Politics and Security, by the same author, which provides a further analysis of the role of blue bonds in financing a sustainable blue economy.
