Deep-sea mining excluded as ICMA-backed coalition releases blue bond guidelines

Capital markets group joins forces with UN agencies and MDBs to publish practitioners' guide to support issuance of credible blue bonds and preserve market integrity.

Deep-sea mining has been excluded from use of proceeds under a guide for blue bonds published by a coalition of the International Capital Markets Association (ICMA), UN agencies and multilateral development banks on Wednesday.

The “practitioners’ guide” was put together by the group to provide issuers with guidance to launch a credible blue bond, to support investors by promoting availability of information to evaluate investment impacts, and to help underwriters “facilitate transactions that preserve the integrity of the market”.

The full group is made up of ICMA, UNEP FI, the UN Global Compact, the International Finance Corporation and the Asian Development Bank.

The new guidance draws on a series of other guides, principles and frameworks published by the individual organisations. It defines a blue bond as a use-of-proceeds bond issued to finance projects supporting the sustainable blue economy.

Its definition of the sustainable blue economy explicitly excludes “non-renewable extractive industries”, including offshore oil and gas, dredging and deep-sea mining. It also focuses in on ocean-related projects, even though some previous blue bonds have included proceeds dedicated to freshwater.

Issuers of blue bonds are recommended to broadly follow the outlines of the ICMA green bond principles in areas such as reporting and allocation. They can label their bonds as “blue” if 100 percent of proceeds are allocated to water-related projects.

Issuers of social bonds can also have eligible blue expenditures – for example, projects relating to food security. The guidance also points towards ICMA’s database of KPIs for sustainability-linked bonds, which include a number of ocean-related targets.

The guidance sets out eight categories of “blue” expenditures that capture the most common expected areas of allocation, as well as allocations by existing blue bonds. They include marine renewables, coastal adaptation and resilience, sustainable ports, and sustainable marine and coastal tourism. These are mapped against the more generic categories set out in the green bond principles.

For each category, the guidance also provides examples of impact KPIs, project outputs, exclusions and social co-benefits. For instance, sustainable fisheries management excludes species on the IUCN red list for endangered, threatened or protected species, while sustainable tourism excludes projects involving involuntary displacement of local communities.

The exclusion of deep-sea mining, while in line with the UNEP FI recommendations, contrasts with blue bond guidelines put out by Indian regulator SEBI, which allows for the practice.

The inclusion of mining in SEBI’s guidelines was controversial, but reflects investor uncertainty over how to deal with the topic. Deep-sea mining can destroy habitats, create pollution and release carbon trapped in seafloor sediment, but could also be a valuable source of minerals required for the net-zero transition.

Robeco, for instance, has joined calls for a moratorium on the practice and has said it will engage companies on the topic. However, the manager said there are “too many question marks, a lack of data and the possibility that the metals and minerals from the seabed might be needed badly for the global energy transition” to justify an outright exclusion.