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‘Blue’ finance makes new progress with plans for dedicated carbon credits

Insurer XL Caitlin finances new project to develop offsetting market

The nascent ‘blue’ finance sector – focused on leveraging investment for marine and coastal conservation – is set to take another step forward with the creation of ‘Blue Carbon Resilience Credits’ that could be used to offset carbon emissions for companies and investors. 
The plans are a collaboration between global conservation body The Nature Conservancy (NTC) and XL Caitlin, the insurance and reinsurance business for property, casualty and specialty business, which launched an Ocean Risk Initiative last year to help find solutions to ocean-related risks. It will fund the new project and NTC will develop it. 
“The hope behind this initiative is that, for the first time, insurance firms and other businesses will be able to offset their carbon footprint while simultaneously better understanding the contribution they are making to reducing coastal hazards in the world’s most vulnerable coastal areas,” NTC said. 
‘Blue Carbon’ is the term given to the carbon sequestered – captured and stored – by coastal wetlands such as salt marshes, seagrass meadows and mangroves. Evidence suggests these sources are up to five-times as effective at sequestration as ‘on-land’ forests and offer more cost-effective protection for coastlines than manmade infrastructure.
For example, a recent study concluded that wetlands prevented $625m in direct flood damage from Hurricane Sandy in the US last year.
In addition, the destruction of coastal wetlands is estimated to result in the release of 450 Mt of Co2 annually, which represents up to 19% of terrestrial land-use emissions. The new initiative seeks to allocate a market value to these benefits and risks, which NTC says are typically undervalued. This market value will be based on impacts to businesses and communities. 
NTC said it would look at different options, including scoring wetlands on factors like storm protection potential, contribution to vulnerable communities and economic activities, and the potential benefit from habitat restoration. Scores would be assigned a dollar value, which could then be combined with the carbon storage capacity of the wetland to create a Blue Carbon Resilience Credit. The credit would enable offsetting by companies and investors and the revenue stream would fund wetland conservation. 
If the move is successful, it will become one of the most significant in a series of steps seeking to bring the ‘blue’ finance sector to institutional investors. Earlier this year, Aviva Investors, Althelia Ecosphere and BPCE Group were among those to support a set of new Sustainable Blue Economy Finance Principles created by the European Investment Bank, the European Commission, WWF and the Prince of Wales’s International Sustainability Unit. In February, the Seychelles launched a national debt ‘swap’ with government and private investors, enabling them to build marine parks. Grenada, the Caribbean island, may follow suit. It was rumoured last year that Australia was considering issuing a sovereign ‘blue’ bond – similar to a green bond, but devoted entirely to the protection of its barrier reef.