Our oceans are critical for human existence and the blue economy is a cornerstone of the global economy. Yet the impacts of climate change, overfishing and nuclear pollution are putting our oceans at great risk. In this context, protecting the blue economy from these mounting threats isn't just a moral imperative – it's a growing financial opportunity. Also, the financial sector is waking up to the opportunities that a healthy ocean can provide.
On June 23rd, co-organized by the Chinese Academy of Financial Inclusion at Renmin University of China (CAFI), China Social Enterprise and Impact Investing Forum (CSEIF) and International Finance Corporation (IFC) (a member of the World Bank Group), the workshop themed "Promising Trends and Opportunities in Blue Finance" invited government officials, industry experts, and international organizations to discuss the blue finance outlook, reference standards and leading practices of blue economy investment at home and abroad, as well as the inclusive and sustainable development of blue finance in China. The workshop aims to put forward practical proposals for the financial sector to further promote the sustainable development of the marine economy.
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As a member of the World Bank Group focusing on the private sector, IFC applies its financial resources and technical expertise to support the global private sector in investing in the blue economy. Many opportunities can be seen in such industries as sustainable fisheries, seafood processing, sewage treatment, ocean-friendly products, and licensed tourism in marine protected areas (MPAs), all of which provide tremendous opportunities for us to promote sustainable development of marine assets. We look forward to financing more market leaders to engage in the blue economy so we must encourage governments, businesses, investors and development institutions to support blue finance too, which is critical for our oceans and rivers.
As a vanguard in social resource allocation, the financial sector plays a unique role in the development of the blue economy. In particular, blue finance helps promote economic growth, improve people’s livelihoods and the health of marine ecosystems, and better address the challenges of economic and social development. To achieve sustainable ocean development and utilization and enhance the well-being of people in coastal areas, blue finance should transform from mainly relying on external sources like a blood transfusion to a more sustained mechanism. By providing accessible, affordable and viable financial services, blue finance can help blue industries and employees in coastal areas achieve green transformation and sustainable development. China’s leading practices in blue finance will provide valuable knowledge and reference for overseas banks.
The financial sector has a critical role to play in pivoting the global economic system towards rebuilding ocean prosperity, restoring biodiversity, and regenerating ocean health. The market has already witnessed the exponential growth of sustainable finance and the emergence of diverse instruments based on green or social use-of-proceeds or sustainability targets. Momentum is now building for blue finance among investors, financial institutions, and issuers globally.
Keynote Speech: Blue Finance Outlook
It is even more imperative for the government to introduce incentive policies for blue finance; fiscal and tax policies, industry regulation policies, industrial policies and financial policies should work together to form a policy synergy. The key to preventing "bluewashing" is to make the standards and information transparent as much as possible. In addition to making regulations, we need to ensure that these standards are comparable and executable, which requires combining international experience with local practice.
We should work collaboratively to address climate change while protecting the marine ecological environment. Specifically, we need to carry out the monitoring and assessment of marine carbon sink and sources and enhance the monitoring and assessment in the marine area to give full play to the ocean in carbon sequestration and enhance the climate change resilience of the ocean. It requires us to provide good incentive policies for financial institutions from fiscal, tax and financial aspects so that they will engage in blue finance more actively.
Regulators and financial institutions should pay close attention to the difficulties of marine SMEs in investment and financing; they should encourage venture capital funds and private equity funds to increase more in high-tech SMEs in such areas as marine biomedicine, marine renewable energy, seawater desalination, marine equipment, marine electronic information, and marine new materials. Meanwhile, equity financing requires relevant training and service to transform scientific and technological achievements into financing and building platforms for exchange, cooperation, and coordination.
IFC launched the Chinese version of IFC Guidelines for Blue Finance (hereinafter referred to as "Guidelines").
IFC hopes to provide a technical reference and standard for investors, issuers, regulators, and policymakers who are making efforts to boost blue finance. The document aims to provide a list of eligible use of proceeds to support private investments that are not only aligned with the Green Bond Principles (GBP) and Green Loan Principles (GLP) but also contribute to the UN's SDG Goals 6 and 14 – "ensure availability and sustainable management of water and sanitation for all," and "conserve and sustainably use the oceans, seas and marine resources for sustainable development."
Over the past two years, we have provided support and experience to the global guidelines for blue finance by assisting the Chinese banking industry to practice and explore blue finance with industry experts at home and abroad. In the Guidelines, based on international standards, we offer a broader definition of blue economic activities that take into account the sustainable development of both marine systems and clean water resources. The launch of the IFC Guidelines for Blue Finance (Chinese version) is not only a milestone in the cooperation between domestic and international communities over the past two years but also a reflection of the leadership of Chinese financial institutions in the field of green and sustainable development, as well as their active contributions to international standards. Recently, at the 2022 UN Ocean Conference in Lisbon, IFC, together with the Asian Development Bank (ADB), the International Capital Market Association (ICMA), the United Nations Global Compact (UNGC), and the United Nations Environment Programme Finance Initiative (UNEP FI), has announced their commitment to developing guidelines that would provide the global market consistency and transparency in financing the blue economy.
IFC, together with Asian Development Bank (ADB), the German Investment and Development Corporation (DEG) and Proparco (a Development Finance Institution partly owned by the French Development Agency), provides a $150 million blue syndicated loan for the Bank of Qingdao, which is the first blue finance investment in China by these four development institutions.
The IFC Guidelines for Blue Finance will serve as a reference resource to help financial institutions develop blue finance activities and increase transparency globally. IFC, ADB, DEG and Proparco jointly provided the first blue syndicated loan to a Chinese financial institution. This is a milestone project for us and an important signal that the financial sector is scaling up its blue finance activities.
It is hoped that more efforts should be made to develop innovative financial instruments, such as blue bonds and some guarantee-related instruments. In addition to development finance institutions like ADB, we hope that development partners, Institutions of Public Character (IPCs) and private sectors will do their part in the development of blue finance. It is particularly important to tap the private sector's funds and we are ready to work with everyone to translate our resources and vision into investments and solid results.
Sustainability is a very important aspect of DEG's business and it is also our strategic direction. We are very proud to be part of this syndicated loan together with IFC, ADB and Proparco, and to work with the Bank of Qingdao. All these have indicated that the blue economy not only brings benefits to the environment but also provides great opportunities for the financial sector.
As a contributor to the ocean and clean water development, blue finance has enormous potential to protect the environment, biodiversity, and human beings. Proparco is proud to work with IFC, ADB and DEG to engage in developing new financial instruments and contribute to bridging the financing gap for healthy ocean and waterway development.
As the first bank to partner with IFC, Bank of Qingdao is proud to pilot a blue finance project and expand the marine economy in China. IFC's investment and expertise will help us to focus on such key areas as sustainable fisheries, waste and sewage treatment and plastic management projects so as to better support sustainable ocean development while also accelerating post-pandemic economic recovery.
Panel Discussion I: Leading Practices in Blue Finance
There are two important dimensions in the Guidelines: the use of proceeds and the ESG standards. The proceeds of blue finance, i.e., sustainable-linked loans and bonds, should be used in specific areas. When IFC issued syndicated loans to the Bank of Qingdao, it also helped the bank to improve its ESG-related work. Specifically, the first step is to design a separate environmental and social management system for the blue loan project within the financial institution. The second is to carry out special management for the high-risk industries and projects involved in the loan and use IFC Performance Standards to manage the environmental and social risks. This is a necessary pathway for a commercial bank to manage its environmental and social risks, which is the result that all international investors look forward to seeing.
Financial institutions have a unique opportunity to work with the marine industry to achieve sustainable economic development in the future and I believe the Bank of Qingdao has recognized that they can play a significant role in this regard. We in the global financial industry should change our business practices and work with investors to achieve sustainable economic development.
Seafood is one of the most traded goods in the world, but if we do not trade it in a sustainable manner, it would pose great risks to business and finance. It is imperative to encourage companies to improve their business models, enhance transparency and support sustainable blue finance. To this end, banks and investors must lay out clear, robust, and credible guidelines like the IFC Guidelines for Blue Finance and the Sustainable Blue Economy Finance Principles.
To achieve the SDGs, it is necessary to maintain biodiversity and stability of the ecological structure and avoid overexploitation of marine resources; financial institutions need to play a guiding role in this regard. In terms of the marine economy, we should strengthen people's responsibility for society and the environment, help the marine industry to make technological breakthroughs and take advantage of technologies to achieve development while ensuring the ecological balance.
Industrial Bank focuses on sustainable economic development. In practice, we should be guided by some principles and industry analysis provided by the initiatives we have signed to heed environmental and social risks and corporate governance of companies that we give loans to; we should make decisions based on the long-term quantitative impact assessment of economic, social and environmental risks. This is an uphill journey, but we still need to move forward with an open mind and an ambitious vision and take good care of the earth, our one and only home.
Panel Discussion II: Investment Opportunities in Blue Economy
Oceans play an irreplaceable role in global climate change and the carbon cycle. The carbon peaking and carbon neutrality goals are shifting the industry focus to the blue carbon sink, an important driver for blue finance with multiple significance. The development of blue carbon sink bears not only on its own future but also has everything to do with the sustainable development of the ocean. Therefore, it is necessary to establish unified rules for blue carbon investigation and monitoring, simulation and assessment, counting and measurement, and transaction management. We look forward to more forms of international cooperation in technical and academic areas, so as to jointly promote the prosperity of the blue economy and develop a roadmap for blue finance.
As a non-profit standard-setting organization for sustainable development in the aquaculture industry, MSC is involved in many international discussions themed on climate change and the development and marketing of sustainable products, all of which also interest the international financial community. We hope to work with our partners at the conference to promote the sustainable development of the aquaculture industry and provide more sustainable seafood products to consumers. MSC is ready to provide support for financial institutions and investors to use MSC’s fishery and supply chain standards to conduct environmental assessments, fisheries resource assessments and audits of the operation and management of fisheries enterprises so that we can help them reduce financial and investment risks and obtain good returns on investment too.
It goes without saying that marine debris is the second most prominent global challenge after climate change. Compared with water pollution and soil pollution, marine plastic pollution exerts a corrosive impact on the global economy as well as the environment. We hope more people can pay attention to the waste plastic recycling industry and bring new development opportunities for this industry.
We mainly focus on investment in marine conservation, agriculture and food, and nature-based solutions (NBS). It has been five years since we started exploring new business areas in 2017. At first, none of us paid much attention to this business but it has achieved such encouraging progress, as more market players began to focus on long-term investments that generate environmental and social benefits. In the marine-related sector also emerge more opportunities that link with other industries and sustainable development.
To truly promote the sustainable development of the marine economy and protect the health of the ocean while getting the ideal financial returns through blue finance investment, investors should deepen their understanding of marine ecosystems and work with various stakeholders to build a shared future. We also expect more Chinese investors to participate in impact investing in the blue economy in the near future.