A consortium of ICMA, UN Global Compact, the UNEP FI, the IFC and the Asian Development Bank is aiming to launch its Blue Bond Guidance by World Ocean Day (8 June), Responsible Investor can reveal.

The news comes on World Water Day and exactly one year after RI reported that the institutions had started collaborating to aid private, sovereign and multilateral issuers in using sustainable bonds to access financing for projects and strategies that advance ocean-related objectives in the issuance of blue bonds.

Public and private organisations have turned to blue bonds to raise funds in recent years, but the market remains a tiny subset of green bonds.

According to a recent report, between 2018 and 2022, 26 blue bond transactions took place, amounting to a total value of $5 billion. However, blue bonds currently represent less than 0.5 percent of the sustainable debt market.

Drawing comparisons to the more mature green bond market, the report concluded that “a lack of standardised definitions, metrics and expertise by issuers and investors are significant barriers to the blue bond market”.

The report also pointed to the ICMA consortium’s expected guidance as part of its call for the establishment of unified guidelines.

A spokesperson for the IFC told RI the guidance will help issuers get a better idea of what they could raise blue bonds for. The guidance note will consolidate “various existing guidelines in the market and is not meant to supersede any, including IFC’s own Guidelines for Blue Finance”, the person added.

On blue bonds, The Nature Conservancy (TNC) – which in September announced its third global debt conversion in Barbados as part of its blue bonds for ocean conservation strategy – told RI that governments and financial institutions have continued to show strong interest in debt conversions as a tool to establish and fund long-term conservation plans.

“We are hoping for more announcements this year with regards to debt conversions and blue bonds,” it added. 

Investor action 

In addition to its involvement in the blue bond guidance work, the UNGC is turning some of its focus to asset owners, Suzanne Johnson, senior adviser to its Sustainable Ocean Business platform, told RI.

“To date, pension fund asset allocation to sustainable ocean investments remains low,” she said. “This is partly due to a lack of policy support, but other barriers to investment include lack of investments which meet the needs of these buyers.”

Investor action in the space is ramping up. For example, the Valuing Water Finance Initiative – launched last August – aims to engage with 72 companies with a high water footprint to address water scarcity and pollution as material financial risks.

Co-ordinated by Ceres, the group currently boasts CalPERS, CalSTRS, the New York City Office of the Comptroller, Federated Hermes, Franklin Templeton and Aviva Investors among its members.

At the UN Water Conference today, Kirsten James, senior programme director of water at Ceres, told RI that the group will announce a new cohort of signatories, bringing the total to 89 investors with more than $16 trillion of assets under management.

“We’re pleased with this progress but need more investors to heed the call for action put forward at the UN Water Conference this week by joining the initiative and helping lead the private sector in addressing the water crisis,” she said.

Ceres is also in the process of assessing how each company’s work on water aligns with the initiative’s corporate expectations for valuing water.

And later this year, it plans to release a benchmark that will track company progress, elevate best practices and provide a tool for investors to help them engage with companies on water.

Pushing for disclosure

Also to mark the UN Conference, the CDP this week called for mandatory corporate water disclosure risks.

The recommendation was part of the non-profit’s report based on its annual corporate water security survey, which saw nearly 4,000 companies disclose – the highest number since the survey began in 2009 and an 85 percent increase in the past five years.

CDP criticised the fact that currently only two G20 members – the EU and the UK – are in the process of mandating comprehensive water disclosure.

“The majority of G20 members are missing an important opportunity to provide solutions that will enable companies and financial institutions to account for and address the risks posed by water insecurity as well as the impacts they have on freshwater resources.”

The report also said that tackling global water insecurity offers huge commercial opportunities. According to the report, 2,718 water-related opportunities were disclosed as part of CDP’s survey, with a combined financial value of $436 billion.

In a recent blog, Murray Birt, senior ESG research analyst at DWS, called on companies to introduce internal water pricing and to stress test their business decisions with a theoretically higher price. He noted that the share of companies currently doing so is disappointingly low.

“Many more companies should use internal water pricing to assess the costs and benefits of investing in clean water technologies and to anticipate science-based government regulations,” he wrote.