Sustainable finance has spent the last two decades learning how to make environmental responsibility part of the language of capital.

Green bonds were an important starting point. When the European Investment Bank issued its Climate Awareness Bond in 2007 and the World Bank followed with its first labelled Green Bond in 2008, the idea was relatively straightforward. Investors could put money into a financial instrument while knowing that the proceeds were intended for projects with defined environmental benefits. Over time, green bonds helped establish a broader principle: capital did not have to be disconnected from environmental outcomes.

That principle expanded into social bonds and sustainability bonds, creating more ways to connect investment with measurable environmental and social objectives. But as sustainable finance became more sophisticated, one enormous part of the global economy remained surprisingly difficult to fit into the conversation.

Water

We often talk about water as a resource. We talk about scarcity, pollution and conservation. We talk less about the fact that entire industries and economies are built around healthy water systems. Shipping depends on functioning ports and waterways. Fisheries depend on healthy marine ecosystems. Tourism depends on beaches, reefs and coastlines. Agriculture depends on freshwater. Coastal communities depend on mangroves and other ecosystems that help protect them from storms and erosion.

Water is therefore not simply something the economy consumes. In many cases, it is part of the infrastructure that allows the economy to function. And that is where the idea of blue finance becomes interesting.

Blue Is More Than the Ocean

Blue finance is often associated with oceans, but the idea is broader than that. It can encompass financing connected to marine ecosystems, freshwater, sustainable fisheries, water management, coastal resilience and other activities that support healthy aquatic systems. The World Bank has increasingly framed blue finance around both ocean protection and water management, reflecting the fact that these systems are deeply connected to economic development.

The first sovereign blue bond made this connection visible. In 2018, Seychelles issued its first sovereign blue bond, raising $15 million to support sustainable marine and fisheries initiatives. The World Bank helped structure the transaction through a partial guarantee, while concessional financing from the Global Environment Facility helped make the financing more affordable. The proceeds were intended to support marine protection, fisheries governance and the development of a sustainable blue economy.

The amount itself was not enormous. The idea was.

For the first time, the protection of a natural system was being directly connected to a financial instrument. That creates an exciting possibility. If healthy water systems create economic value, perhaps protecting them can become economically valuable too.

But there is an important difference between making environmental protection economically valuable and simply making nature another asset that can attract capital. That distinction is where the real blue finance conversation should begin.

When Protection Becomes Part of the Financial Deal

The COVID-19 pandemic made this question even more relevant. It did not create blue finance. Seychelles had already issued its blue bond in 2018. What the pandemic did was expose how vulnerable many economies dependent on tourism and natural resources could become when economic activity suddenly stopped.

Belize offers one of the clearest examples. In 2021, the country completed a debt for marine protection transaction involving $553 million of commercial sovereign debt. A $364 million blue bond was used within the structure to help finance the repurchase of Belize’s existing debt at a discount. In exchange, Belize committed to long term marine conservation spending and expanding the area of ocean under protection. The transaction reduced public debt by about 12 percent of GDP.

On paper, it was an impressive combination of financial restructuring and environmental protection. But it also raises a question that is easy to overlook when we focus on the size of the transaction. What happens when the financial success of a blue transaction becomes easier to measure than the environmental success?

A country can reduce its debt. Investors can receive returns. A conservation fund can be established. Capital can be mobilised. All of those things can happen while the underlying ecosystem continues to deteriorate. That is not an argument against blue finance. It is an argument for being much more demanding about what we expect from it.

The Seychelles experience offers an important reminder. In 2024, the IMF reported that 80 percent of the proceeds from its 2018 blue bond had been used to establish the Blue Investment Fund, but that no loans from the fund had yet reached private sector projects. The IMF identified administrative requirements and limited project capacity among the challenges affecting implementation. The lesson is not that the original bond failed. The lesson is that raising capital and deploying capital are two different achievements, and neither automatically guarantees environmental protection.

Can We Put a Price on Protection Without Losing the Point?

This is where blue finance needs a different measure of success. The question should not simply be how much money can be raised for water related projects. It should be whether financial capital can actually make the protection of water more durable.

That means asking different questions.

Is a reef healthier because of the money raised? Are fish populations more sustainable? Are coastal communities better protected? Is freshwater being managed more responsibly? Will the conservation work continue after the financial transaction has disappeared from the headlines?

These questions are less impressive than announcing the size of a bond issuance. They are also much closer to the reason the money was needed in the first place.

There is a temptation to believe that putting an economic value on nature will automatically make society protect it. But economic value and ecological value are not interchangeable. A coral reef may support tourism, fisheries and coastal protection, but its importance does not end with the revenue those activities generate. A mangrove may reduce the economic damage caused by storms, but its value cannot be reduced only to the amount of money it saves.

So perhaps blue finance should not try to put a price on everything that water provides. Perhaps it should do something more useful. It should make the cost of losing those systems visible.

For businesses, this could change the way sustainability is understood. A hotel does not only have an environmental impact on a coastline. Its future may depend on that coastline remaining healthy. A seafood company does not only take resources from the ocean. Its business depends on those resources continuing to exist. A company operating near a river may not think of water as a financial asset, but its operations can still be exposed to the consequences of water scarcity or pollution.

That changes the question from “How can we finance sustainability?” to something more fundamental: “What natural systems does our economy depend on, and what will it cost us if they disappear?”

“Water is key for plant, animal and human life as well as for human civilization, economy, development and, eventually, survival,” said Martin Kussmann, CEO and Founder of Kussmann Biotech GmbH.

That is where blue finance can become genuinely powerful. Not because it creates another category of bonds. Not because it gives investors another place to put capital. But because it could create a financial reason to protect something that economies have always depended upon.

Blue finance is still a very small market compared with green finance. The Financial Times reported that blue bond issuance reached around $2.5 billion in 2024, only about 0.5 percent of green bond volumes. Its significance therefore should not be judged by whether it eventually becomes as large as the green bond market.

Its real significance may be whether it changes what we expect finance to do.

The goal should not be to make water investable. Water was already economically valuable long before financial markets gave it a label. The goal should be to make financial capital useful enough to water that the protection lasts.

Because if blue finance succeeds, the most important return should not be found on a balance sheet. It should be visible in the water.

References:

15 years of EIB green bonds: leading sustainable investment from niche to mainstream. (2022, July 5). European Investment Bank. https://www.eib.org/en/press/all/2022-308-15-years-of-eib-green-bonds-leading-sustainable-investment-from-niche-to-mainstream

World Bank. (2023). Green Bonds. World Bank. https://treasury.worldbank.org/en/about/unit/treasury/ibrd/ibrd-green-bonds

Sustainability Bond Guidelines (SBG) » ICMA. (n.d.). Www.Icmagroup.Org. Retrieved September 23, 2026, from https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-bond-guidelines-sbg

Guidelines for Blue Finance. (2022). https://documents1.worldbank.org/curated/en/099832306292211127/pdf/IDU0cb7d3e640d8b904d360974007f562050d2ef.pdf

CASE STUDY Seychelles: Introducing the World’s First Sovereign Blue Bond. (n.d.). Retrieved September 23, 2026, from https://thedocs.worldbank.org/en/doc/cbaf1cefc5164a7f340716ef0af6fd7e-0340012025/original/Case-Study-Blue-Bond-Seychelles.pdf

International Monetary Fund. Western Hemisphere Dept. (2022). Belize: 2022 Article IV Consultation-Press Release; and Staff Report. IMF Staff Country Reports, 2022(133). https://doi.org/10.5089/9798400208652.002.A001

Fund., M. (2024). Seychelles: 2024 Article IV Consultation, Second Reviews Under the Arrangement Under the Extended Fund Facility and the Arrangement Under the Resilience and Sustainability Facility, Requests for a Waiver of Nonobservance and Modification of Performance Criteria-Press Release; and Staff Report; and Statement by the Executive Director for Seychelles. IMF Staff Country Reports, 2024(191). https://doi.org/10.5089/9798400280047.002.A001

Mundy, S. (2025, June 9). How blue bonds could give a boost to ocean finance. @FinancialTimes; Financial Times. https://www.ft.com/content/7d369493-f1af-4955-b29e-1f0d23bc514b